UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended
May 4, 2013
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______ TO ______
Commission File Number 001-34742
EXPRESS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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26-2828128
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1 Express Drive
Columbus, Ohio
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43230
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(Address of principal executive offices)
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(Zip Code)
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Telephone: (614) 474-4001
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
x
The number of outstanding shares of the registrant’s common stock was 85,406,418 as of May 31, 2013.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, and financial results, our plans and objectives for future operations, growth or initiatives, strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
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changes in consumer spending and general economic conditions;
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our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors;
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fluctuations in our sales and results of operations on a seasonal basis and due to a variety of other factors;
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increased competition from other retailers;
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the success of the malls and shopping centers in which our stores are located;
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our dependence upon independent third parties to manufacture all of our merchandise;
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the availability constraints and price volatility of raw materials and labor used to manufacture our products;
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interruptions of the flow of merchandise from international manufacturers causing disruptions in our supply chain;
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shortages of inventory, delayed shipments to our online customers, and harm to our reputation due to difficulties or shut-down of distribution facilities;
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our reliance upon independent third-party transportation providers for substantially all of our product shipments;
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our dependence upon key executive management;
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our growth strategy, including our international expansion plan;
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our dependence on a strong brand image;
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our leasing substantial amounts of space;
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our reliance on third parties to provide us with certain key services for our business;
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our reliance on information systems and any failure, inadequacy, interruption or security failure of those systems;
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claims made against us resulting in litigation;
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changes in laws and regulations applicable to our business;
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our inability to protect our trademarks or other intellectual property rights;
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our substantial indebtedness and lease obligations;
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restrictions imposed by our indebtedness on our current and future operations and our ability to pay dividends;
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fluctuations in energy costs;
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changes in taxation requirements or the results of tax audits; and
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impairment charges on long-lived assets.
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We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. For the discussion of these risks and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended February 2, 2013 ("Annual Report"), filed with the Securities and Exchange Commission (“SEC”) on April 2, 2013. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as otherwise required by law.
INDEX
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PART I
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ITEM 1.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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PART II
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ITEM 1.
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ITEM 1A.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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ITEM 5.
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ITEM 6.
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PART I – FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS.
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EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
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May 4, 2013
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February 2, 2013
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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244,214
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$
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256,297
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Receivables, net
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10,773
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11,024
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Inventories
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226,329
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215,082
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Prepaid minimum rent
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25,362
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25,166
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Other
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9,850
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8,293
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Total current assets
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516,528
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515,862
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PROPERTY AND EQUIPMENT
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650,899
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625,344
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Less: accumulated depreciation
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(354,879
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)
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(346,975
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Property and equipment, net
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296,020
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278,369
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TRADENAME/DOMAIN NAME
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197,734
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197,719
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DEFERRED TAX ASSETS
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16,808
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16,808
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OTHER ASSETS
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9,773
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10,441
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Total assets
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$
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1,036,863
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$
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1,019,199
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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158,394
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$
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176,125
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Deferred revenue
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22,117
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27,851
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Accrued bonus
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468
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336
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Accrued expenses
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94,857
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108,464
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Total current liabilities
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275,836
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312,776
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LONG-TERM DEBT
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198,923
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198,843
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OTHER LONG-TERM LIABILITIES
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154,497
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136,418
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Total liabilities
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629,256
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648,037
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COMMITMENTS AND CONTINGENCIES (Note 11)
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STOCKHOLDERS’ EQUITY:
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Preferred stock – $0.01 par value; 10,000 shares authorized; no shares issued or outstanding
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—
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—
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Common stock – $0.01 par value; 500,000 shares authorized; 89,586 shares and 89,322 shares issued at May 4, 2013 and February 2, 2013, respectively, and 85,390 shares and 85,224 shares outstanding at May 4, 2013 and February 2, 2013, respectively
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896
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893
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Additional paid-in capital
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110,732
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105,012
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Accumulated other comprehensive gain (loss)
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50
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(20
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Retained earnings
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364,358
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331,921
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Treasury stock – at average cost; 4,196 shares and 4,098 shares at May 4, 2013 and February 2, 2013, respectively
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(68,429
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(66,644
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Total stockholders’ equity
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407,607
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371,162
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Total liabilities and stockholders’ equity
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$
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1,036,863
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$
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1,019,199
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See notes to unaudited consolidated financial statements.
EXPRESS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
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Thirteen Weeks Ended
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May 4,
2013
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April 28,
2012
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NET SALES
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$
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508,524
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$
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495,952
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COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS
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337,747
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307,185
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Gross profit
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170,777
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188,767
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OPERATING EXPENSES:
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Selling, general, and administrative expenses
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112,623
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114,195
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Other operating (income) expense, net
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(540
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15
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Total operating expenses
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112,083
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114,210
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OPERATING INCOME
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58,694
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74,557
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INTEREST EXPENSE, NET
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4,805
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4,782
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OTHER EXPENSE (INCOME), NET
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229
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(208
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INCOME BEFORE INCOME TAXES
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53,660
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69,983
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INCOME TAX EXPENSE
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21,223
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27,910
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NET INCOME
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$
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32,437
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$
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42,073
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OTHER COMPREHENSIVE INCOME:
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Foreign currency translation gain (loss)
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70
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(78
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COMPREHENSIVE INCOME
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$
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32,507
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$
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41,995
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EARNINGS PER SHARE:
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Basic
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$
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0.38
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$
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0.47
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Diluted
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$
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0.38
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$
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0.47
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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Basic
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85,095
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88,846
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Diluted
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85,490
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89,310
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See notes to unaudited consolidated financial statements.
EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
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Thirteen Weeks Ended
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May 4, 2013
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April 28, 2012
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income
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$
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32,437
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$
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42,073
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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17,441
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17,049
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Loss on disposal of property and equipment
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64
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17
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Excess tax benefit from share-based compensation
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(1
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(273
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Share-based compensation
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5,011
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3,856
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Deferred taxes
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—
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(188
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Changes in operating assets and liabilities:
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Receivables, net
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287
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(263
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Inventories
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(11,296
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12,468
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Accounts payable, deferred revenue, and accrued expenses
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(44,776
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(32,333
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Other assets and liabilities
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6,194
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3,216
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Net cash provided by operating activities
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5,361
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45,622
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Capital expenditures
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(16,853
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(16,932
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Purchase of intangible assets
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—
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(185
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Net cash used in investing activities
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(16,853
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(17,117
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Payments on capital lease obligation
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(15
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(13
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Excess tax benefit from share-based compensation
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1
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273
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Proceeds from share-based compensation
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1,082
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623
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Repurchase of common stock
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(1,785
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(1,349
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Net cash used in financing activities
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(717
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(466
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EFFECT OF EXCHANGE RATE ON CASH
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126
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38
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
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(12,083
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28,077
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CASH AND CASH EQUIVALENTS, Beginning of period
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256,297
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152,362
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CASH AND CASH EQUIVALENTS, End of period
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$
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244,214
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$
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180,439
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See notes to unaudited consolidated financial statements.
Notes to Unaudited Consolidated Financial Statements
(unaudited)
1. Description of Business and Basis of Presentation
Business Description
Express, Inc., together with its subsidiaries ("Express" or the "Company"), is a specialty apparel and accessories retailer of women's and men's merchandise, targeting the
20
to
30
year old customer. Express merchandise is sold through retail stores and the Company's website, www.express.com. As of
May 4, 2013
, Express operated
620
primarily mall-based stores in the United States, Canada, and Puerto Rico. Additionally, the Company earned revenue from
18
franchise stores. These franchise stores are operated by franchisees pursuant to franchise agreements covering the Middle East, Mexico, and certain other Latin American countries. Under the franchise agreements, the franchisees operate stores that sell Express-branded apparel and accessories purchased directly from the Company.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are referred to by the calendar year in which the fiscal year commences. References herein to "
2013
" and "
2012
" represent the 52-week period ended February 1, 2014 and the 53-week period ended
February 2, 2013
, respectively. All references herein to “the
first quarter of 2013
” and “the
first quarter of 2012
” represent the thirteen weeks ended
May 4, 2013
and
April 28, 2012
, respectively.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for
2013
. Therefore, these statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended
February 2, 2013
, included in the Company's Annual Report on Form 10-K, filed with the SEC on April 2, 2013.
Principles of Consolidation
The unaudited Consolidated Financial Statements include the accounts of Express, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements. Actual results may differ from those estimates. The Company revises its estimates and assumptions as new information becomes available.
Reclassifications
Certain prior period amounts have been reclassified or adjusted to conform to the current year presentation.
2. Segment Reporting
The Company defines an operating segment on the same basis that it uses to evaluate performance internally. The Company has determined that, together, its Chief Executive Officer and its Chief Operating Officer are the Chief Operating Decision Maker
and that there is 1 operating segment. Therefore, the Company reports results as a single segment, which includes the operation of its Express brick-and-mortar retail stores, e-commerce operations, and international operations.
The following is information regarding the Company's sales channels:
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Thirteen Weeks Ended
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May 4, 2013
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April 28, 2012
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(in thousands)
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Stores
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$
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430,557
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$
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443,446
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E-commerce
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70,722
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47,876
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Other revenue
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7,245
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4,630
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Total net sales
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$
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508,524
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$
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495,952
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Other revenue consists primarily of shipping and handling revenue related to e-commerce activity, gift card breakage, and revenue from franchise agreements.
Revenues and long-lived assets relating to the Company's international operations for the
thirteen weeks ended May 4, 2013
and
April 28, 2012
and as of
May 4, 2013
and
February 2, 2013
, respectively, were not material and, therefore, not reported separately from domestic revenues and long-lived assets.
3. Earnings Per Share
The following table provides a reconciliation between basic and diluted weighted-average shares used to calculate basic and diluted earnings per share:
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Thirteen Weeks Ended
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May 4, 2013
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April 28, 2012
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(in thousands)
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Weighted-average shares - basic
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85,095
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88,846
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Dilutive effect of stock options, restricted stock units, and restricted stock
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395
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464
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Weighted-average shares - diluted
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85,490
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89,310
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Equity awards representing
2.8 million
and
2.0 million
shares of common stock were excluded from the computation of diluted earnings per share for the
thirteen weeks ended May 4, 2013 and April 28, 2012
, respectively, as the effects of the awards would have been anti-dilutive.
Additionally, for the
thirteen weeks ended May 4, 2013 and April 28, 2012
, there were
0.5 million
and
0.3 million
shares, respectively, of restricted stock excluded from the computation of diluted weighted average shares because the number of shares that will ultimately be issued is contingent on the Company's performance compared to pre-established annual performance goals.
4. Fair Value of Financial Assets
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
Level 1-Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2-Valuation is based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3-Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
The following table presents the Company's assets measured at fair value on a recurring basis as of
May 4, 2013
and
February 2, 2013
, aggregated by the level in the fair value hierarchy within which those measurements fall.
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May 4, 2013
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Level 1
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Level 2
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Level 3
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(in thousands)
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U.S. treasury securities money market funds
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$
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220,104
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$
|
—
|
|
$
|
—
|
|
|
|
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February 2, 2013
|
|
Level 1
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Level 2
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Level 3
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(in thousands)
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U.S. treasury securities money market funds
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$
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236,086
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$
|
—
|
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$
|
—
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|
The carrying amounts reflected on the unaudited Consolidated Balance Sheets for cash, cash equivalents, receivables, prepaid expenses, and payables as of
May 4, 2013
and
February 2, 2013
approximated their fair values.
5. Intangible Assets
The following table provides the significant components of intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 4, 2013
|
|
Cost
|
|
Accumulated
Amortization
|
|
Ending Net Balance
|
|
(in thousands)
|
Tradename
|
$
|
196,144
|
|
|
$
|
—
|
|
|
$
|
196,144
|
|
Internet domain name/other
|
1,590
|
|
|
—
|
|
|
1,590
|
|
Net favorable lease obligations
|
19,750
|
|
|
18,116
|
|
|
1,634
|
|
|
$
|
217,484
|
|
|
$
|
18,116
|
|
|
$
|
199,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2013
|
|
Cost
|
|
Accumulated
Amortization
|
|
Ending Net Balance
|
|
(in thousands)
|
Tradename
|
$
|
196,144
|
|
|
$
|
—
|
|
|
$
|
196,144
|
|
Internet domain name/other
|
1,575
|
|
|
—
|
|
|
1,575
|
|
Net favorable lease obligations
|
19,750
|
|
|
17,811
|
|
|
1,939
|
|
|
$
|
217,469
|
|
|
$
|
17,811
|
|
|
$
|
199,658
|
|
The Company's tradename and internet domain name/other have indefinite lives. Net favorable lease obligations are amortized over a period between 5 and 7 years, which represent the remaining life of each respective lease at the evaluation date, and are included in other assets on the unaudited Consolidated Balance Sheets. Amortization expense totaled
$0.3 million
and
$0.4 million
during the
thirteen weeks ended May 4, 2013 and April 28, 2012
, respectively.
6. Related Party Transactions
The transactions described in this note are transactions between the Company and entities affiliated with Golden Gate Private Equity, Inc. ("Golden Gate"). Prior to July 2007, the Company operated as a division of L Brands, Inc. ("L Brands"). In July 2007, a Golden Gate affiliate acquired approximately
75%
of the outstanding equity interests in the Company from L Brands, and the Company began its transition to a stand-alone company. In May 2010, the Company completed an Initial Public Offering ("IPO") whereby Golden Gate and L Brands sold a portion of their shares. Following the IPO, both Golden Gate and L Brands gradually reduced their ownership interest in the Company. On July 29, 2011, L Brands disposed of its remaining
ownership interest in the Company and, as a result of this disposition, ceased to be a related party as of the end of the second quarter of 2011. On March 19, 2012, Golden Gate sold its remaining ownership interest in the Company and, as of May 31, 2012, Golden Gate no longer had representation on the Company's Board of Directors ("Board"). As a result, Golden Gate ceased to be a related party as of June 1, 2012. The related party activity with Golden Gate affiliates described in this note includes only expenses incurred and income earned through the date which Golden Gate ceased to be a related party.
Transactions with Other Golden Gate Affiliates
The Company transacts with Golden Gate affiliates for e-commerce warehouse and fulfillment services, software license purchases, and consulting and software maintenance services.
The Company incurred the following charges from Golden Gate affiliates for various services, which are included primarily in cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income:
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
April 28, 2012
|
|
(in thousands)
|
E-commerce warehouse and fulfillment
|
$
|
6,750
|
|
Software licenses and consulting and software maintenance services
|
$
|
40
|
|
The Company provides real estate services to certain Golden Gate affiliates. Income recognized during the
thirteen weeks ended April 28, 2012
was
$0.1 million
.
Interest expense incurred on the 8 3/4% Senior Notes attributable to the
$40.0 million
of Senior Notes previously owned by a Golden Gate affiliate was
$0.2 million
during the
thirteen weeks ended April 28, 2012
.
7. Income Taxes
The provision for income taxes is based on a current estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. The Company's quarterly effective tax rate does not reflect a benefit associated with losses related to certain foreign subsidiaries and foreign tax credit carryovers. The Company's effective tax rate was
39.6%
and
39.9%
for the thirteen weeks ended May 4, 2013 and April 28, 2012, respectively.
8. Lease Financing Obligations
In certain lease arrangements, the Company is involved with the construction of the building. To the extent the Company is involved in the construction of structural improvements or takes construction risk prior to commencement of a lease, it is deemed the owner of the project for accounting purposes. Therefore, the Company records an asset in property and equipment on the unaudited Consolidated Balance Sheets, including any capitalized interest costs, and related liabilities in accrued interest and lease financing obligation in other long-term liabilities on the unaudited Consolidated Balance Sheets, for the replacement cost of the Company's portion of the pre-existing building plus the amount of construction-in-progress incurred by the landlord as of the balance sheet date. Once construction is complete, the Company considers the requirements for sale-leaseback treatment, including the transfer of all risks of ownership back to the landlord, and whether the Company has any continuing involvement in the leased property. If the arrangement does not qualify for sale-leaseback treatment, the building assets subject to these obligations remain on the Company's unaudited Consolidated Balance Sheets at their historical cost, and such assets are depreciated over their remaining useful lives. The replacement cost of the pre-existing building, as well as the costs of construction paid by the landlord, are recorded as lease financing obligations, and a portion of the lease payments are applied as payments of principal and interest. The interest rate selected for lease financing obligations is evaluated at lease inception based on the Company's incremental borrowing rate. At the end of the initial lease term, should the Company decide not to renew the lease, the Company would reverse equal amounts of the net book value of the assets and the corresponding lease financing obligations. The initial lease terms related to these lease arrangements are expected to expire in 2023 and 2029. As of
May 4, 2013
and
February 2, 2013
, the Company has recorded
$26.7 million
and
$16.2 million
, respectively, of construction-in-progress, with a corresponding amount to lease financing obligations, each of which is reflected in the unaudited Consolidated Balance Sheets. These assets and liabilities are classified as non-cash items for purposes of the unaudited Consolidated Statements of Cash Flow.
Rent expense relating to the land is recognized on a straight-line basis once construction begins. Once the store opens, the Company will not report rent expense for the portion of the rent payment determined to be related to the properties which are owned for accounting purposes. Rather, this portion of rent payment under the lease will be recognized as a reduction of the lease financing obligations and as interest expense.
9. Debt
Borrowings outstanding consisted of the following:
|
|
|
|
|
|
|
|
|
|
May 4, 2013
|
|
February 2, 2013
|
|
(in thousands)
|
8 3/4% Senior Notes
|
$
|
200,850
|
|
|
$
|
200,850
|
|
Debt discount on Senior Notes
|
(1,927
|
)
|
|
(2,007
|
)
|
Total long-term debt
|
$
|
198,923
|
|
|
$
|
198,843
|
|
Revolving Credit Facility
On July 29, 2011, Express Holding, LLC, a wholly-owned subsidiary ("Express Holding"), and its subsidiaries entered into an Amended and Restated
$200.0 million
secured Asset-Based Credit Facility ("Revolving Credit Facility"). As of
May 4, 2013
, there were no borrowings outstanding and approximately
$197.9 million
available under the the Revolving Credit Facility.
The Revolving Credit Facility requires Express Holding and its subsidiaries to maintain a fixed charge coverage ratio of at least
1.0
:
1.0
if excess availability plus eligible cash collateral is less than
10%
of the borrowing base for
15
consecutive days. In addition, the Revolving Credit Facility contains customary covenants and restrictions on Express Holding and its subsidiaries' activities, including, but not limited to, limitations on the incurrence of additional indebtedness; liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions, and prepayment of other debt; distributions, dividends, and the repurchase of capital stock; transactions with affiliates; and the ability to change the nature of its business or its fiscal year. All obligations under the Revolving Credit Facility are guaranteed by Express Holding and its domestic subsidiaries (that are not borrowers) and secured by a lien on substantially all of the assets of Express Holding and its domestic subsidiaries.
Senior Notes
On March 5, 2010, Express, LLC and Express Finance Corp. ("Express Finance"), wholly-owned subsidiaries of the Company, co-issued, in a private placement,
$250.0 million
of 8 3/4% Senior Notes due in 2018 (the "Senior Notes") at an offering price of
98.6%
of the face value.
Prior to March 1, 2014, the Senior Notes may be redeemed in part or in full at a redemption price equal to the principal amount plus a make-whole premium, calculated in accordance with the indenture governing the Senior Notes, and accrued and unpaid interest. On or after March 1, 2014, the Senior Notes may be redeemed in part or in full at the following percentages of the outstanding principal amount prepaid:
104.38%
prior to March 1, 2015;
102.19%
on or after March 1, 2015, but prior to March 1, 2016; and at the principal amount on or after March 1, 2016.
The indenture governing the Senior Notes contains customary covenants and restrictions on the activities of Express, LLC, Express Finance, and Express, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; payment of dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of Express, LLC's assets. Certain of these covenants will be suspended if the Senior Notes are assigned an investment grade rating by both Standard & Poor's and Moody's Investors Service and no default has occurred or is continuing. If either rating on the Senior Notes should subsequently decline to below investment grade, the suspended covenants will be reinstated.
Fair Value of Debt
The fair value of the Senior Notes was estimated using a number of factors, such as recent trade activity, size, timing, and yields of comparable bonds and is, therefore, within Level 2 of the fair value hierarchy. As of
May 4, 2013
, the estimated fair value of the Senior Notes was
$218.2 million
.
Letters of Credit
The Company may enter into various trade letters of credit ("trade LCs") in favor of certain vendors to secure merchandise. These trade LCs are issued for a defined period of time, for specific shipments, and generally expire 3 weeks after the merchandise shipment date. As of
May 4, 2013
and
February 2, 2013
, there were no outstanding trade LCs. Additionally, the Company enters into stand-by letters of credit ("stand-by LCs") on an as-need basis to secure merchandise and fund other general and administrative costs. As of
May 4, 2013
and
February 2, 2013
, outstanding stand-by LCs totaled
$2.1 million
.
10. Share-Based Compensation
The Company records the fair value of share-based payments to employees in the unaudited Consolidated Statements of Income and Comprehensive Income as compensation expense, net of forfeitures, over the requisite service period.
Share-based Compensation Plans
The following summarizes our share-based compensation expense:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands)
|
Restricted stock units and restricted stock
|
$
|
2,778
|
|
|
$
|
1,948
|
|
Stock options
|
2,232
|
|
|
1,898
|
|
Restricted shares (equity issued pre-IPO)
|
1
|
|
|
10
|
|
Total share-based compensation
|
$
|
5,011
|
|
|
$
|
3,856
|
|
The stock compensation related income tax benefit recognized by the Company during the
thirteen weeks ended May 4, 2013 and April 28, 2012
was
$1.9 million
and
$1.5 million
, respectively.
Stock Options
During the
thirteen weeks ended May 4, 2013
, the Company granted stock options under the Amended and Restated Express, Inc. 2010 Incentive Compensation Plan (the "2010 Plan"). The fair value of the stock options is determined using the Black-Scholes-Merton option-pricing model as described later in this note. The majority of stock options granted under the 2010 Plan vest
25%
per year over 4 years and have a 10 year contractual life, however those granted to the Chief Executive Officer vest ratably over 3 years. The expense for stock options is recognized using the straight-line attribution method.
The Company's activity with respect to stock options during the
thirteen weeks ended May 4, 2013
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Grant Date
Weighted Average
Exercise Price
|
|
Weighted-Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value
|
|
(in thousands, except per share amounts and years)
|
Outstanding, February 2, 2013
|
3,092
|
|
|
$
|
18.99
|
|
|
|
|
|
Granted
|
612
|
|
|
$
|
17.49
|
|
|
|
|
|
Exercised
|
(62
|
)
|
|
$
|
16.98
|
|
|
|
|
|
Forfeited or expired
|
(68
|
)
|
|
$
|
19.45
|
|
|
|
|
|
Outstanding, May 4, 2013
|
3,574
|
|
|
$
|
18.76
|
|
|
8.1
|
|
$
|
3,127
|
|
Expected to vest at May 4, 2013
|
2,095
|
|
|
$
|
18.85
|
|
|
8.4
|
|
$
|
2,025
|
|
Exercisable at May 4, 2013
|
1,397
|
|
|
$
|
18.62
|
|
|
7.6
|
|
$
|
1,014
|
|
The following provides additional information regarding the Company's stock options:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands, except per share amounts)
|
Weighted average grant date fair value of options granted
|
$
|
9.27
|
|
|
$
|
13.47
|
|
Total intrinsic value of options exercised
|
$
|
93
|
|
|
$
|
267
|
|
As of
May 4, 2013
, there was approximately
$17.5 million
of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of approximately
1.7
years.
The Company uses the Black-Scholes-Merton option-pricing model to value stock options granted to employees and directors. The Company's determination of the fair value of stock options is affected by the Company's stock price as well as a number of subjective and complex assumptions. These assumptions include the risk-free interest rate, the Company's expected stock price volatility over the term of the awards, expected term of the award, and dividend yield.
The fair value of stock options was estimated at the grant date using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
Risk-free interest rate
(1)
|
1.06
|
%
|
|
1.14
|
%
|
Price Volatility
(2)
|
56.0
|
%
|
|
55.9
|
%
|
Expected term (years)
(3)
|
6.19
|
|
|
6.16
|
|
Dividend yield
(4)
|
—
|
|
|
—
|
|
|
|
(1)
|
Represents the yield on U.S. Treasury securities with a term consistent with the expected term of the stock options.
|
|
|
(2)
|
For the first 2 years following the Company's IPO, this was based on the historical volatility of selected comparable companies over a period consistent with the expected term of the stock options because the Company had a limited history of being publicly traded. Comparable companies were selected primarily based on industry, stage of life cycle, and size. Beginning with the second anniversary of the IPO in May 2012, the Company began using its own volatility as an additional input in the determination of expected volatility.
|
|
|
(3)
|
Calculated utilizing the “simplified” methodology prescribed by Staff Accounting Bulletin No. 107 due to the lack of historical exercise data necessary to provide a reasonable basis upon which to estimate the term.
|
|
|
(4)
|
The Company does not currently plan on paying regular dividends.
|
Restricted Stock Units and Restricted Stock
During the
thirteen weeks ended May 4, 2013
, the Company granted restricted stock units (“RSUs”) under the 2010 Plan, including
0.5 million
RSUs with performance conditions. The fair value of the RSUs is determined based on the Company's stock price on the grant date. The expense for RSUs is recognized using the straight-line attribution method, except for RSUs with performance conditions, for which the graded vesting method is used. The RSUs with performance conditions are also subject to time-based vesting with requisite service periods of 2 years for the Chief Executive Officer and 3 years for other employees. RSUs without performance conditions vest ratably over 4 years.
The Company's activity with respect to RSUs and restricted stock for the
thirteen weeks ended May 4, 2013
was as follows:
|
|
|
|
|
|
|
|
Number of
Shares
|
Grant Date
Weighted Average
Fair Value
|
|
(in thousands, except per share amounts)
|
Unvested, February 2, 2013
|
1,218
|
|
$
|
21.49
|
|
Granted
|
839
|
|
$
|
17.49
|
|
Vested
|
(273
|
)
|
$
|
21.33
|
|
Forfeited
|
(53
|
)
|
$
|
20.99
|
|
Unvested, May 4, 2013
|
1,731
|
|
$
|
19.00
|
|
The total fair value/intrinsic value of RSUs and restricted stock that vested was
$5.8 million
during the
thirteen weeks ended May 4, 2013
. As of
May 4, 2013
, there was approximately
$25.6 million
of total unrecognized compensation expense related to unvested RSUs and restricted stock, which is expected to be recognized over a weighted-average period of approximately
1.9
years.
11. Commitments and Contingencies
In a complaint filed on July 7, 2011 in the United States District Court for the Northern District of Illinois styled as Eric Wynn, et al., v. Express, LLC, Express was named as a defendant in a purported nationwide collective action alleging violations of the Fair Labor Standards Act and of applicable Illinois state wage and hour statutes related to alleged off-the-clock work. The lawsuit sought unspecified monetary damages and attorneys' fees. In March 2012, the court granted conditional collective action certification.
To avoid the expense and uncertainty of further litigation with respect to this matter, in January 2013, the Company entered into a settlement agreement to resolve all wage and hour claims that were asserted or could have been asserted by the plaintiffs and other similarly situated employees and former employees who opted-in to the collective action. The settlement was subsequently approved by the court in the first quarter of 2013. Under the terms of the approved settlement, the Company will pay approximately
$0.4 million
in the aggregate to (i) plaintiffs and other employees and former employees who opted-in to the collective action, and (ii) certain legal fees and expenses on behalf of the plaintiffs and other employees and former employees who opted-in to the collective action. As of
May 4, 2013
, the unaudited Consolidated Balance Sheets included a reserve for the settlement amount, which is expected to be paid out by August 2013.
The Company is subject to various other claims and contingencies arising out of the normal course of business. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company's results of operations, financial condition, or cash flows.
12. Guarantor Subsidiaries
On March 5, 2010, Express, LLC and Express Finance (the “Subsidiary Issuers”), both wholly-owned indirect subsidiaries of Express, Inc., issued the Senior Notes. Express, Inc. (“Guarantor”) and certain of its indirect 100% owned subsidiaries (“Guarantor Subsidiaries”) have guaranteed, on a joint and several basis, the obligations under the Senior Notes. The guarantees are not full and unconditional because Guarantor Subsidiaries can be released and relieved of their obligations under certain customary circumstances contained in the indenture governing the Senior Notes. These circumstances include the following, so long as other applicable provisions of the indenture are adhered to: any sale or other disposition of all or substantially all of the assets of any Guarantor Subsidiary, any sale or other disposition of capital stock of any Guarantor Subsidiary, or designation of any restricted subsidiary that is a Guarantor Subsidiary as an unrestricted subsidiary. On August 26, 2012, Express, LLC contributed certain assets and liabilities to a newly created Guarantor Subsidiary. As a result, the current and prior period condensed consolidating financial information has been revised to retroactively give effect to the new structure in place as of August 26, 2012.
The following consolidating schedules present the condensed financial information on a combined basis.
EXPRESS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 4, 2013
|
|
Express, Inc.
|
|
Subsidiary
Issuers
|
|
Guarantor
Subsidiaries
|
|
Other
Subsidiaries
|
|
Eliminations
|
|
Consolidated
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,974
|
|
|
$
|
218,329
|
|
|
$
|
22,831
|
|
|
$
|
1,080
|
|
|
$
|
—
|
|
|
$
|
244,214
|
|
Receivables, net
|
—
|
|
|
5,282
|
|
|
3,727
|
|
|
1,764
|
|
|
—
|
|
|
10,773
|
|
Inventories
|
—
|
|
|
12,919
|
|
|
209,993
|
|
|
3,417
|
|
|
—
|
|
|
226,329
|
|
Prepaid minimum rent
|
—
|
|
|
471
|
|
|
23,828
|
|
|
1,063
|
|
|
—
|
|
|
25,362
|
|
Intercompany loan receivable
|
—
|
|
|
20,556
|
|
|
—
|
|
|
—
|
|
|
(20,556
|
)
|
|
—
|
|
Intercompany receivable
|
—
|
|
|
—
|
|
|
103,431
|
|
|
5,783
|
|
|
(109,214
|
)
|
|
—
|
|
Other
|
57
|
|
|
5,712
|
|
|
3,960
|
|
|
121
|
|
|
—
|
|
|
9,850
|
|
Total current assets
|
2,031
|
|
|
263,269
|
|
|
367,770
|
|
|
13,228
|
|
|
(129,770
|
)
|
|
516,528
|
|
Property and equipment, net
|
—
|
|
|
36,243
|
|
|
243,737
|
|
|
16,040
|
|
|
—
|
|
|
296,020
|
|
Tradename/domain name
|
—
|
|
|
197,734
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,734
|
|
Investment in subsidiary
|
404,441
|
|
|
393,189
|
|
|
—
|
|
|
398,657
|
|
|
(1,196,287
|
)
|
|
—
|
|
Deferred tax assets
|
738
|
|
|
10,369
|
|
|
5,701
|
|
|
—
|
|
|
—
|
|
|
16,808
|
|
Other assets
|
—
|
|
|
7,375
|
|
|
2,392
|
|
|
6
|
|
|
—
|
|
|
9,773
|
|
Total assets
|
$
|
407,210
|
|
|
$
|
908,179
|
|
|
$
|
619,600
|
|
|
$
|
427,931
|
|
|
$
|
(1,326,057
|
)
|
|
$
|
1,036,863
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
154,929
|
|
|
$
|
2,782
|
|
|
$
|
683
|
|
|
$
|
—
|
|
|
$
|
158,394
|
|
Deferred revenue
|
—
|
|
|
1,168
|
|
|
20,841
|
|
|
108
|
|
|
—
|
|
|
22,117
|
|
Accrued bonus
|
—
|
|
|
—
|
|
|
428
|
|
|
40
|
|
|
—
|
|
|
468
|
|
Accrued expenses
|
(655
|
)
|
|
15,458
|
|
|
79,041
|
|
|
1,013
|
|
|
—
|
|
|
94,857
|
|
Intercompany payable
|
—
|
|
|
109,214
|
|
|
—
|
|
|
—
|
|
|
(109,214
|
)
|
|
—
|
|
Intercompany loan payable
|
—
|
|
|
—
|
|
|
—
|
|
|
20,556
|
|
|
(20,556
|
)
|
|
—
|
|
Total current liabilities
|
(655
|
)
|
|
280,769
|
|
|
103,092
|
|
|
22,400
|
|
|
(129,770
|
)
|
|
275,836
|
|
Long-term debt
|
—
|
|
|
198,923
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
198,923
|
|
Other long-term liabilities
|
258
|
|
|
29,830
|
|
|
118,423
|
|
|
5,986
|
|
|
—
|
|
|
154,497
|
|
Total liabilities
|
(397
|
)
|
|
509,522
|
|
|
221,515
|
|
|
28,386
|
|
|
(129,770
|
)
|
|
629,256
|
|
Commitments and Contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
407,607
|
|
|
398,657
|
|
|
398,085
|
|
|
399,545
|
|
|
(1,196,287
|
)
|
|
407,607
|
|
Total liabilities and stockholders’ equity
|
$
|
407,210
|
|
|
$
|
908,179
|
|
|
$
|
619,600
|
|
|
$
|
427,931
|
|
|
$
|
(1,326,057
|
)
|
|
$
|
1,036,863
|
|
EXPRESS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2013
|
|
Express, Inc.
|
|
Subsidiary
Issuers
|
|
Guarantor
Subsidiaries
|
|
Other
Subsidiaries
|
|
Eliminations
|
|
Consolidated
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
938
|
|
|
$
|
230,174
|
|
|
$
|
22,924
|
|
|
$
|
2,261
|
|
|
$
|
—
|
|
|
$
|
256,297
|
|
Receivables, net
|
—
|
|
|
5,612
|
|
|
3,147
|
|
|
2,265
|
|
|
—
|
|
|
11,024
|
|
Inventories
|
—
|
|
|
13,597
|
|
|
198,094
|
|
|
3,391
|
|
|
—
|
|
|
215,082
|
|
Prepaid minimum rent
|
—
|
|
|
451
|
|
|
23,697
|
|
|
1,018
|
|
|
—
|
|
|
25,166
|
|
Intercompany loan receivable
|
—
|
|
|
20,754
|
|
|
—
|
|
|
—
|
|
|
(20,754
|
)
|
|
—
|
|
Intercompany receivable
|
—
|
|
|
—
|
|
|
98,304
|
|
|
5,783
|
|
|
(104,087
|
)
|
|
—
|
|
Other
|
—
|
|
|
5,085
|
|
|
3,162
|
|
|
46
|
|
|
—
|
|
|
8,293
|
|
Total current assets
|
938
|
|
|
275,673
|
|
|
349,328
|
|
|
14,764
|
|
|
(124,841
|
)
|
|
515,862
|
|
Property and equipment, net
|
—
|
|
|
46,913
|
|
|
215,829
|
|
|
15,627
|
|
|
—
|
|
|
278,369
|
|
Tradename/domain name
|
—
|
|
|
197,719
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,719
|
|
Investment in subsidiary
|
369,140
|
|
|
371,084
|
|
|
—
|
|
|
363,356
|
|
|
(1,103,580
|
)
|
|
—
|
|
Deferred tax assets
|
738
|
|
|
10,369
|
|
|
5,701
|
|
|
—
|
|
|
—
|
|
|
16,808
|
|
Other assets
|
—
|
|
|
7,710
|
|
|
2,727
|
|
|
4
|
|
|
—
|
|
|
10,441
|
|
Total assets
|
$
|
370,816
|
|
|
$
|
909,468
|
|
|
$
|
573,585
|
|
|
$
|
393,751
|
|
|
$
|
(1,228,421
|
)
|
|
$
|
1,019,199
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
173,395
|
|
|
$
|
1,132
|
|
|
$
|
1,598
|
|
|
$
|
—
|
|
|
$
|
176,125
|
|
Deferred revenue
|
—
|
|
|
1,223
|
|
|
26,507
|
|
|
121
|
|
|
—
|
|
|
27,851
|
|
Accrued bonus
|
—
|
|
|
—
|
|
|
334
|
|
|
2
|
|
|
—
|
|
|
336
|
|
Accrued expenses
|
(346
|
)
|
|
34,490
|
|
|
72,963
|
|
|
1,357
|
|
|
—
|
|
|
108,464
|
|
Intercompany payable
|
—
|
|
|
104,087
|
|
|
—
|
|
|
—
|
|
|
(104,087
|
)
|
|
—
|
|
Intercompany loan payable
|
—
|
|
|
—
|
|
|
—
|
|
|
20,754
|
|
|
(20,754
|
)
|
|
—
|
|
Total current liabilities
|
(346
|
)
|
|
313,195
|
|
|
100,936
|
|
|
23,832
|
|
|
(124,841
|
)
|
|
312,776
|
|
Long-term debt
|
—
|
|
|
198,843
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
198,843
|
|
Other long-term liabilities
|
—
|
|
|
34,074
|
|
|
96,706
|
|
|
5,638
|
|
|
—
|
|
|
136,418
|
|
Total liabilities
|
(346
|
)
|
|
546,112
|
|
|
197,642
|
|
|
29,470
|
|
|
(124,841
|
)
|
|
648,037
|
|
Commitments and Contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
371,162
|
|
|
363,356
|
|
|
375,943
|
|
|
364,281
|
|
|
(1,103,580
|
)
|
|
371,162
|
|
Total liabilities and stockholders’ equity
|
$
|
370,816
|
|
|
$
|
909,468
|
|
|
$
|
573,585
|
|
|
$
|
393,751
|
|
|
$
|
(1,228,421
|
)
|
|
$
|
1,019,199
|
|
EXPRESS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended May 4, 2013
|
|
|
|
Subsidiary
|
|
Guarantor
|
|
Other
|
|
|
|
Consolidated
|
|
Express, Inc.
|
|
Issuers
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
—
|
|
|
$
|
227,992
|
|
|
$
|
496,902
|
|
|
$
|
6,862
|
|
|
$
|
(223,232
|
)
|
|
$
|
508,524
|
|
Cost of goods sold, buying and occupancy costs
|
—
|
|
|
151,571
|
|
|
405,116
|
|
|
4,315
|
|
|
(223,255
|
)
|
|
337,747
|
|
Gross profit
|
—
|
|
|
76,421
|
|
|
91,786
|
|
|
2,547
|
|
|
23
|
|
|
170,777
|
|
Selling, general, and administrative expenses
|
112
|
|
|
38,294
|
|
|
71,804
|
|
|
2,412
|
|
|
1
|
|
|
112,623
|
|
Other operating expense (income), net
|
—
|
|
|
—
|
|
|
(562
|
)
|
|
—
|
|
|
22
|
|
|
(540
|
)
|
Operating income (loss)
|
(112
|
)
|
|
38,127
|
|
|
20,544
|
|
|
135
|
|
|
—
|
|
|
58,694
|
|
Interest expense, net
|
—
|
|
|
5,262
|
|
|
(469
|
)
|
|
12
|
|
|
—
|
|
|
4,805
|
|
(Income) loss in subsidiary
|
(32,505
|
)
|
|
(12,614
|
)
|
|
—
|
|
|
(32,505
|
)
|
|
77,624
|
|
|
—
|
|
Other expense (income), net
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
—
|
|
|
229
|
|
Income (loss) before income taxes
|
32,393
|
|
|
45,479
|
|
|
21,013
|
|
|
32,399
|
|
|
(77,624
|
)
|
|
53,660
|
|
Income tax expense (benefit)
|
(44
|
)
|
|
12,974
|
|
|
8,293
|
|
|
—
|
|
|
—
|
|
|
21,223
|
|
Net income (loss)
|
$
|
32,437
|
|
|
$
|
32,505
|
|
|
$
|
12,720
|
|
|
$
|
32,399
|
|
|
$
|
(77,624
|
)
|
|
$
|
32,437
|
|
Foreign currency translation gain (loss)
|
70
|
|
|
70
|
|
|
—
|
|
|
140
|
|
|
(210
|
)
|
|
70
|
|
Comprehensive income
|
$
|
32,507
|
|
|
$
|
32,575
|
|
|
$
|
12,720
|
|
|
$
|
32,539
|
|
|
$
|
(77,834
|
)
|
|
$
|
32,507
|
|
EXPRESS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended April 28, 2012
|
|
|
|
Subsidiary
|
|
Guarantor
|
|
Other
|
|
|
|
Consolidated
|
|
Express, Inc.
|
|
Issuers
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Total
|
Net sales
|
$
|
—
|
|
|
$
|
298,049
|
|
|
$
|
492,453
|
|
|
$
|
3,111
|
|
|
$
|
(297,661
|
)
|
|
$
|
495,952
|
|
Cost of goods sold, buying and occupancy costs
|
—
|
|
|
198,995
|
|
|
402,042
|
|
|
3,696
|
|
|
(297,548
|
)
|
|
307,185
|
|
Gross profit
|
—
|
|
|
99,054
|
|
|
90,411
|
|
|
(585
|
)
|
|
(113
|
)
|
|
188,767
|
|
Selling, general, and administrative expenses
|
270
|
|
|
43,107
|
|
|
69,646
|
|
|
1,285
|
|
|
(113
|
)
|
|
114,195
|
|
Other operating expense (income), net
|
—
|
|
|
1,509
|
|
|
17
|
|
|
(1,511
|
)
|
|
—
|
|
|
15
|
|
Operating income (loss)
|
(270
|
)
|
|
54,438
|
|
|
20,748
|
|
|
(359
|
)
|
|
—
|
|
|
74,557
|
|
Interest expense, net
|
—
|
|
|
4,696
|
|
|
—
|
|
|
86
|
|
|
—
|
|
|
4,782
|
|
(Income) loss in subsidiary
|
(42,343
|
)
|
|
26,784
|
|
|
—
|
|
|
(42,343
|
)
|
|
57,902
|
|
|
—
|
|
Other expense (income), net
|
—
|
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
|
—
|
|
|
(208
|
)
|
Income (loss) before income taxes
|
42,073
|
|
|
22,958
|
|
|
20,748
|
|
|
42,106
|
|
|
(57,902
|
)
|
|
69,983
|
|
Income tax expense (benefit)
|
—
|
|
|
(19,385
|
)
|
|
47,295
|
|
|
—
|
|
|
—
|
|
|
27,910
|
|
Net income (loss)
|
$
|
42,073
|
|
|
$
|
42,343
|
|
|
$
|
(26,547
|
)
|
|
$
|
42,106
|
|
|
$
|
(57,902
|
)
|
|
$
|
42,073
|
|
Foreign currency translation gain (loss)
|
(78
|
)
|
|
(78
|
)
|
|
—
|
|
|
(156
|
)
|
|
234
|
|
|
(78
|
)
|
Comprehensive income
|
$
|
41,995
|
|
|
$
|
42,265
|
|
|
$
|
(26,547
|
)
|
|
$
|
41,950
|
|
|
$
|
(57,668
|
)
|
|
$
|
41,995
|
|
EXPRESS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended May 4, 2013
|
|
|
|
Subsidiary
|
|
Guarantor
|
|
Other
|
|
|
|
Consolidated
|
|
Express, Inc.
|
|
Issuers
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Total
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
1,739
|
|
|
$
|
(5,805
|
)
|
|
$
|
9,120
|
|
|
$
|
307
|
|
|
$
|
—
|
|
|
$
|
5,361
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(6,224
|
)
|
|
(9,213
|
)
|
|
(1,416
|
)
|
|
—
|
|
|
(16,853
|
)
|
Net cash provided by (used in) investing activities
|
—
|
|
|
(6,224
|
)
|
|
(9,213
|
)
|
|
(1,416
|
)
|
|
—
|
|
|
(16,853
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligation
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
Excess tax benefit from share-based compensation
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Proceeds from share-based compensation
|
1,082
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,082
|
|
Repayment of intercompany loan
|
—
|
|
|
1,972
|
|
|
—
|
|
|
(1,972
|
)
|
|
—
|
|
|
—
|
|
Borrowings under intercompany loan
|
—
|
|
|
(1,774
|
)
|
|
—
|
|
|
1,774
|
|
|
—
|
|
|
—
|
|
Repurchase of common stock
|
(1,785
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,785
|
)
|
Net cash provided by (used in) financing activities
|
(703
|
)
|
|
184
|
|
|
—
|
|
|
(198
|
)
|
|
—
|
|
|
(717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
1,036
|
|
|
(11,845
|
)
|
|
(93
|
)
|
|
(1,181
|
)
|
|
—
|
|
|
(12,083
|
)
|
Cash and cash equivalents, beginning of period
|
938
|
|
|
230,174
|
|
|
22,924
|
|
|
2,261
|
|
|
—
|
|
|
256,297
|
|
Cash and cash equivalents, end of period
|
$
|
1,974
|
|
|
$
|
218,329
|
|
|
$
|
22,831
|
|
|
$
|
1,080
|
|
|
$
|
—
|
|
|
$
|
244,214
|
|
EXPRESS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended April 28, 2012
|
|
|
|
Subsidiary
|
|
Guarantor
|
|
Other
|
|
|
|
Consolidated
|
|
Express, Inc.
|
|
Issuers
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Total
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
(32
|
)
|
|
$
|
33,335
|
|
|
$
|
12,242
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
45,622
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(3,780
|
)
|
|
(13,369
|
)
|
|
217
|
|
|
—
|
|
|
(16,932
|
)
|
Purchase of intangible assets
|
—
|
|
|
(185
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(185
|
)
|
Net cash provided by (used in) investing activities
|
—
|
|
|
(3,965
|
)
|
|
(13,369
|
)
|
|
217
|
|
|
—
|
|
|
(17,117
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligation
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
Excess tax benefit from share-based compensation
|
—
|
|
|
273
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
273
|
|
Proceeds from share-based compensation
|
623
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
623
|
|
Repayment of intercompany loan
|
—
|
|
|
140
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
—
|
|
Repurchase of common stock
|
(1,349
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,349
|
)
|
Net cash provided by (used in) financing activities
|
(726
|
)
|
|
400
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
(466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(758
|
)
|
|
29,770
|
|
|
(1,127
|
)
|
|
192
|
|
|
—
|
|
|
28,077
|
|
Cash and cash equivalents, beginning of period
|
1,575
|
|
|
121,273
|
|
|
27,964
|
|
|
1,550
|
|
|
—
|
|
|
152,362
|
|
Cash and cash equivalents, end of period
|
$
|
817
|
|
|
$
|
151,043
|
|
|
$
|
26,837
|
|
|
$
|
1,742
|
|
|
$
|
—
|
|
|
$
|
180,439
|
|
13. Subsequent Events
On May 24, 2012, the Company's Board authorized the repurchase of up to
$100 million
of the Company's common stock, which may be made from time to time in open market or privately negotiated transactions. Subsequent to the first quarter of 2013, the Company repurchased
0.2 million
shares of its common stock at an average price of
$21.41
per share, totaling
$3.3 million
, including commissions.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of the Company as of the dates and for the periods presented below. The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended
February 2, 2013
and our unaudited consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors. See “Forward-Looking Statements.”
Overview
Express is a specialty apparel and accessories retailer offering both women's and men's merchandise. We have over 30 years of experience offering a distinct combination of style and quality at an attractive value, targeting women and men between 20 and 30 years old. We offer our customers an assortment of fashionable apparel and accessories to address fashion needs across multiple wearing occasions, including work, casual, jeanswear, and going-out occasions.
The mixed results that we experienced in 2012 continued into the first quarter of 2013. We generally saw traffic in the malls remain slow early in the quarter as a result of, we believe, higher payroll taxes, delayed tax refunds, and uncertainty about the economy as a whole. This led to higher promotional activity throughout the mall in which we too participated in an effort to remain competitive. This higher promotional activity led to decreased merchandise margins and lower diluted earnings per share of
$0.38
compared to
$0.47
in the first quarter of 2012. We did, however, see strong responses to certain of our promotional activities in terms of volume, and our customers responded positively to our Spring product line. These factors, in addition to our continued growth in e-commerce, allowed us to increase revenues by
3%
over the first quarter of 2012. As we look ahead to the remainder of 2013, we are confident in our product line and look forward to making additional progress against our 4 pillars of growth. Our results with respect to these pillars in the first quarter of 2013 and plans for the near future are as follows.
Improve Productivity of Our Retail Stores
Net sales per average gross square foot decreased from $357 for the twelve months ended April 28, 2012 to $344 for the twelve months ended May 4, 2013, primarily driven by decreased traffic and higher promotional activity. Net sales per average gross square foot is determined by dividing net sales (excluding e-commerce sales, shipping and handling revenue related to e-commerce, gift card breakage, and franchise revenue) for the period by average gross square feet during the period.
Expand Our Store Base
In the first quarter of 2013, we opened
3
new Company-operated stores, including 1 store in Canada, and closed
8
stores in the United States. As of
May 4, 2013
, we operated
620
locations. For the remainder of 2013, we expect to open approximately 13 additional stores, including 3 in Canada, and close 1 store in the United States. The planned store openings include 1 Company-owned flagship store in the United States. Another flagship location is planned to open in Spring 2014. These flagships will result in approximately $9 million in incremental pre-opening rent expense in 2013, of which $4.0 million was recognized in the first quarter and approximately $5 million is expected to be recognized in the second and third quarters of 2013. Our projected store closure is related to a dual- gender store conversion.
Expand Our e-Commerce Platform
In the first quarter of 2013, our e-commerce sales increased
48%
over the first quarter of 2012, which was incremental to a 28% increase in the first quarter of 2012 over the first quarter of 2011. The growth in e-commerce sales in the first quarter of 2013 occurred in both men's and women's merchandise. We believe the significant drivers of our continued e-commerce
growth were as follows: improving our website, from the look and feel to the overall functionality; offering a larger product assortment, with sizes, colors, and styles available exclusively online; and implementing free shipping everyday with a minimum purchase of $125. For the remainder of 2013, we will continue to look for ways to improve the e-commerce experience and generate additional e-commerce sales. E-commerce sales represented
14%
of our total net sales in the first quarter of 2013. We continue to expect to see this channel grow to be at least 15% of net sales.
Expand Internationally
In the first quarter of 2013, we continued our international expansion with 2 additional franchise store openings in the Middle East and 1 additional franchise store opening in Latin America. At quarter end, we were earning revenue from 18 franchise locations, a net increase of 11 stores from the first quarter of 2012. For the remainder of 2013, we plan to sign deals with 2 additional franchise partners and open between 10 and 13 franchise store locations.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales and other individual store performance factors, gross profit, and selling, general, and administrative expenses. We also review other metrics, such as EBITDA and Adjusted EBITDA.
Net Sales.
Net sales reflects revenues from the sale of our merchandise, less returns and discounts, as well as shipping and handling revenue related to e-commerce, gift card breakage, and revenue earned from our franchise agreements.
Comparable Sales and Other Individual Store Performance Factors.
Comparable sales are calculated based upon stores that were open at least thirteen full months as of the end of the reporting period. In the fourth quarter of 2010, we began including e-commerce sales in our comparable sales results and adjusted comparable sales figures retroactively back to the second quarter of 2009. A store is not considered a part of the comparable sales base if the square footage of the store changed by more than 20% due to remodel or relocation activities, or if we execute a phased remodel in place whereby a portion of the store is under construction and, therefore, that portion of the store is not productive selling space. Under the latter scenario, the store is excluded from comparable sales during the construction period only, and is then considered a comparable store when construction is complete. As we continue to increase our store count, we expect that non-comparable sales will begin to contribute more to our total net sales than they currently contribute. We also review sales per gross square foot, average unit retail price, units per transaction, average dollar sales per transaction, traffic, and conversion, among other things, to evaluate the performance of individual stores and on a company-wide basis.
Gross Profit.
Gross profit is equal to net sales minus cost of goods sold, buying and occupancy costs. Gross margin measures gross profit as a percentage of net sales. Cost of goods sold, buying and occupancy costs includes the direct cost of purchased merchandise, inventory shrinkage, inventory adjustments, inbound freight to our distribution center and outbound freight to our stores, merchandising, design, planning and allocation, and manufacturing/production costs, occupancy costs related to store operations (such as rent, real estate taxes, landlord charges, common area maintenance, utilities, and depreciation on assets), and all logistics costs associated with our e-commerce business.
Our cost of goods sold, buying and occupancy costs increase in higher volume quarters because the direct cost of purchased merchandise is tied to sales. Buying and occupancy costs are largely fixed and do not necessarily increase as volume increases. Changes in the mix of our products, such as changes in the proportion of accessories, which are higher margin, may impact our overall cost of goods sold, buying and occupancy costs. We review our inventory levels on an on-going basis in order to identify slow-moving merchandise and generally use markdowns to clear such merchandise. The timing and level of markdowns are driven primarily by seasonality and customer acceptance of our merchandise. We use third-party vendors and company-owned outlet stores to dispose of mark-out-of-stock merchandise. The primary drivers of the costs of the merchandise costs are raw materials, labor in the countries where our merchandise is sourced, and logistics costs associated with transporting our merchandise.
Selling, General, and Administrative Expenses.
Selling, general, and administrative expenses include all operating costs not included in cost of goods sold, buying and occupancy costs, with the exception of costs such as proceeds received from insurance claims and gain/loss on disposal of assets, which are included in other operating (income) expense, net. These costs include payroll and other expenses related to operations at our corporate home office, store expenses other than occupancy, and marketing expenses, which primarily include production, mailing, and print advertising costs. With the exception of store payroll and marketing, these expenses generally are fixed and do not vary proportionally with net sales. As a result, selling, general, and administrative expenses as a percentage of net sales is typically higher in lower volume quarters and lower in higher volume quarters.
Results of Operations
The table below sets forth the various line items in the unaudited Consolidated Statements of Income and Comprehensive Income as a percentage of net sales for the
first quarter of 2013
and the
first quarter of 2012
.
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
Net sales
|
100
|
%
|
|
100
|
%
|
Cost of goods sold, buying and occupancy costs
|
66
|
%
|
|
62
|
%
|
Gross profit
|
34
|
%
|
|
38
|
%
|
Selling, general, and administrative expenses
|
22
|
%
|
|
23
|
%
|
Other operating (income) expense, net
|
—
|
%
|
|
—
|
%
|
Operating income
|
12
|
%
|
|
15
|
%
|
Interest expense
|
1
|
%
|
|
1
|
%
|
Other expense (income), net
|
—
|
%
|
|
—
|
%
|
Income before income taxes
|
11
|
%
|
|
14
|
%
|
Income tax expense
|
4
|
%
|
|
6
|
%
|
Net income
|
6
|
%
|
|
8
|
%
|
Net Sales
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
Net sales (in thousands)
|
$
|
508,524
|
|
|
$
|
495,952
|
|
Comparable sales percentage change
|
—
|
%
|
|
4
|
%
|
Comparable sales percentage change (excluding e-commerce sales)
|
(5
|
)%
|
|
2
|
%
|
Gross square footage at end of period (in thousands)
|
5,389
|
|
|
5,222
|
|
Number of:
|
|
|
|
Stores open at beginning of period
|
625
|
|
|
609
|
|
New stores
|
3
|
|
|
4
|
|
Closed stores
|
(8
|
)
|
|
(7
|
)
|
Stores open at end of period
|
620
|
|
|
606
|
|
Net sales increased approximately
$12.6 million
, or
3%
. Comparable sales were flat in the
first quarter of 2013
compared to the
first quarter of 2012
. The flat comparable sales resulted from continued growth in e-commerce and an increase in store transactions offset by a decrease in store average dollar sales. We attribute the decrease in average dollar sales to additional promotional activity throughout the first quarter to remain competitive in a highly promotional landscape and to sell through slower-moving inventory. Non-comparable sales increased $11.8 million, driven by new store openings and remodels.
Gross Profit
The following table shows cost of sales and gross profit in dollars for the stated periods:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands)
|
Cost of goods sold, buying and occupancy costs
|
$
|
337,747
|
|
|
$
|
307,185
|
|
Gross profit
|
$
|
170,777
|
|
|
$
|
188,767
|
|
The
450
basis point
decrease
in gross margin, or gross profit as a percentage of net sales, in the
first quarter of 2013
compared to the
first quarter of 2012
was comprised of a 240 basis point deterioration in merchandise margin and a 210 basis point increase in buying and occupancy costs. The decrease in merchandise margin was primarily driven by increased promotional activity in the first quarter of 2013, as noted previously. The increase in buying and occupancy costs was primarily driven by rent, including the impact of approximately $4.0 million of pre-opening rent expense associated with the 2 flagship stores under construction, as well as increased e-commerce fulfillment costs resulting from additional e-commerce sales.
Selling, General, and Administrative Expenses
The following table shows selling, general, and administrative expenses in dollars for the stated periods:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands)
|
Selling, general, and administrative expenses
|
$
|
112,623
|
|
|
$
|
114,195
|
|
The
$1.6 million
decrease
in selling, general, and administrative expenses in the
first quarter of 2013
compared to the
first quarter of 2012
was driven by a $3.4 million decrease in marketing, including direct mail and point-of-sale visual marketing, and a $2.5 million decrease in incentive compensation. These decreases were partially offset by a $2.3 million increase in payroll, which was primarily related to additional headcount at our home office to support the international expansion and e-commerce growth pillars, merit increases, and stock compensation expense.
Income Tax Expense
The following table shows income tax expense in dollars for the stated periods:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands)
|
Income tax expense
|
$
|
21,223
|
|
|
$
|
27,910
|
|
The effective tax rate was
39.6%
for the
first quarter of 2013
compared to
39.9%
for
first quarter of 2012
. We anticipate our effective tax rate will be between 39.3% and 39.8% in 2013.
Liquidity and Capital Resources
General
Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our Revolving Credit Facility. Our primary cash needs are for merchandise inventories, payroll, store rent, and capital expenditures, primarily associated with opening new stores, remodeling existing stores, and information technology projects. The most significant components of our working capital are merchandise inventories, accounts payable, and other accrued expenses. Our liquidity position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within 3 to 5 days of the related sale, and have up to 75 days to pay certain merchandise vendors and 45 days to pay the majority of our non-merchandise vendors.
Our cash position is seasonal as a result of building up inventory for the next selling season and, as a result, our cash flows from operations during the Spring are usually lower when compared to the rest of the year. Our cash balances generally increase during the summer selling season and then increase further during the Fall and holiday seasons. We believe that cash generated from operations and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet working capital requirements, anticipated capital expenditures, and scheduled interest payments for at least the next 12 months.
Cash Flow Analysis
A summary of cash provided by or used in operating, investing and financing activities are shown in the following table:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
May 4, 2013
|
|
April 28, 2012
|
|
(in thousands)
|
Provided by operating activities
|
$
|
5,361
|
|
|
$
|
45,622
|
|
Used in investing activities
|
(16,853
|
)
|
|
(17,117
|
)
|
Used in financing activities
|
(717
|
)
|
|
(466
|
)
|
Increase (decrease) in cash and cash equivalents
|
(12,083
|
)
|
|
28,077
|
|
Cash and cash equivalents at end of period
|
$
|
244,214
|
|
|
$
|
180,439
|
|
Net Cash Provided by Operating Activities
The majority of our operating cash inflows are derived from sales. Our operating cash outflows generally consist of payments to vendors for merchandise, employees for wages, salaries, and other employee benefits, and landlords for rent. Operating cash outflows also include payments for income taxes and interest on long-term debt.
Net cash provided by operating activities was
$5.4 million
for the
thirteen weeks ended May 4, 2013
compared to
$45.6 million
for the
thirteen weeks ended April 28, 2012
,
a decrease
of
$40.3 million
. The
decrease
in cash provided by operations primarily related to the following:
|
|
•
|
Items included in net income provided
$55.0 million
of cash for the
thirteen weeks ended May 4, 2013
compared to
$62.5 million
for the
thirteen weeks ended April 28, 2012
. The reduction in the current year was primarily driven by the decreased performance of the business as discussed in "Overview" and "Results of Operations".
|
|
|
•
|
In addition to the decrease in cash provided by items included in net income discussed above, there was
$49.6 million
of cash used due to working capital changes during the
thirteen weeks ended May 4, 2013
compared to
$16.9 million
of cash used in the
thirteen weeks ended April 28, 2012
. Working capital is subject to cyclical operating needs, the timing of receivable collections and payable and expense payments, and the seasonal fluctuations in our operations. The $32.7 million change primarily relates to the timing of merchandise and real estate payments in the first quarter of 2013 versus the first quarter of 2012 and increased cash outflows for purchases of inventory. The primary reasons for the increase in inventory
are to support our sales plan for the remainder of the year and to invest in certain key categories that are generating significant volume, including denim and woven tops.
|
Net Cash Used in Investing Activities
Investing activities consist primarily of capital expenditures for new and remodeled store construction and fixtures, information technology, and home office and design studio renovations.
Net cash used in investing activities totaled
$16.9 million
for the
thirteen weeks ended May 4, 2013
compared to
$17.1 million
for the
thirteen weeks ended April 28, 2012
, a
$0.3 million
change.
We expect capital expenditures for the remainder of 2013 to be approximately $93.0 million to $98.0 million, primarily driven by new store construction, including 2 flagship locations which require additional expenditures over that of a typical new store opening. These capital expenditures do not include the impact of landlord allowances, which are expected to be approximately $10.0 to $15.0 million for the remainder of 2013.
Net Cash Used in Financing Activities
Net cash used in financing activities totaled
$0.7 million
for the
thirteen weeks ended May 4, 2013
as compared to
$0.5 million
for the
thirteen weeks ended April 28, 2012
,
an increase
of approximately $0.2 million.
Credit Facilities
The following provides an overview of the current status of our long term debt arrangements. Refer to Note 9 of our unaudited Consolidated Financial Statements for additional information related to our long-term debt arrangements.
Revolving Credit Facility
On July 29, 2011, Express Holding and its domestic subsidiaries entered into an amended and restated $200.0 million secured asset-based loan credit agreement. The amended Revolving Credit Facility is scheduled to expire on July 29, 2016 and allows for up to $30.0 million of swing line advances and up to $45.0 million to be available in the form of letters of credit.
As of
May 4, 2013
, there were no borrowings outstanding under the Revolving Credit Facility, and we had
$197.9 million
of availability. We were not subject to the fixed charge coverage ratio covenant in the Revolving Credit Facility at
May 4, 2013
because excess availability plus eligible cash collateral exceeded 10% of the borrowing base.
Senior Notes
On March 5, 2010, Express, LLC and Express Finance, as co-issuers, issued $250.0 million of 8
3
/
4
% Senior Notes due 2018 at an offering price of 98.6% of the face value. Interest on the Senior Notes is payable on March 1 and September 1 of each year. Unamortized debt issuance costs outstanding related to the Senior Notes as of
May 4, 2013
were $5.9 million.
Contractual Obligations
Our Company's contractual obligations and other commercial commitments did not change materially between
February 2, 2013
and
May 4, 2013
. For additional information regarding our contractual obligations as of
February 2, 2013
, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended
February 2, 2013
.
Seasonality
Our business is seasonal and, historically, we have realized a higher portion of our net sales and net income in the third and fourth quarters due primarily to early Fall selling patterns as well as the impact of the holiday season. Generally, the annual sales split is approximately 45% for the Spring season (first and second quarters) and 55% for the Fall season (third and fourth quarters). Normal cash requirements are typically higher in the first and third quarters due to inventory-related working capital requirements for early Fall and holiday selling periods. Our business is also subject, at certain times, to calendar shifts, which may occur during key selling periods close to holidays such as Easter, Thanksgiving, and Christmas, and regional fluctuations for events such as sales tax holidays.
Critical Accounting Policies
Management has determined that our most critical accounting policies are those related to revenue recognition, merchandise inventory valuation, long-lived assets valuation, claims and contingencies, income taxes, and share-based payments. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to the policies discussed in our Annual Report on Form 10-K for the year ended
February 2, 2013
.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our Revolving Credit Facility bears interest at variable rates. See Note 9 of our unaudited Consolidated Financial Statements for further information on the calculation of the rates. We did not borrow any amounts under the Revolving Credit Facility during the
thirteen weeks ended May 4, 2013
. Borrowings under our Senior Notes bear interest at a fixed rate. For fixed rate debt, interest rate changes affect the fair value of such debt, but do not impact earnings or cash flow. Changes in interest rates are not expected to have a material impact on our future earnings or cash flows given our limited exposure to such changes.
Foreign Currency Exchange Risk
All of our purchases are denominated in U.S. dollars and, therefore we are not exposed to foreign currency exchange risk on these purchases. However, we currently operate 12 stores in Canada, with the functional currency of our Canadian operations being the Canadian dollar. Our Canadian subsidiaries have intercompany accounts with our U.S. subsidiaries that eliminate upon consolidation, but the transactions involving such accounts do expose us to foreign currency exchange risk. We do not utilize hedging instruments to mitigate foreign currency exchange risks. As of
May 4, 2013
, a hypothetical 10% change in the Canadian foreign exchange rate would have impacted our results of operations by approximately $2.0 million.
ITEM 4.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation prior to filing this report of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of
May 4, 2013
.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the
first quarter of 2013
that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.
Information relating to legal proceedings is set forth in Note 11 to our unaudited Consolidated Financial Statements included in Part I of this Quarterly Report and is incorporated herein by reference.
Our risk factors as of
May 4, 2013
have not changed materially from those disclosed in our Annual Report on Form 10-K filed with the SEC on April 2, 2013. The risk factors disclosed in our Annual Report on Form 10-K, in addition to the other information set forth in this Quarterly Report, could materially affect our business, financial condition or results.
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
The following table provides information regarding the purchase of shares of our common stock made by or on behalf of the Company or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during each month of the quarterly period ended
May 4, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)
|
|
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
(2)
|
|
|
(in thousands, except per share amounts)
|
February 3, 2013 - March 2, 2013
|
|
61
|
|
|
$
|
18.51
|
|
|
—
|
|
|
$
|
35,038
|
|
March 3, 2013 - April 6, 2013
|
|
37
|
|
|
$
|
17.67
|
|
|
—
|
|
|
$
|
35,038
|
|
April 7, 2013 - May 4, 2013
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
35,038
|
|
Total
|
|
98
|
|
|
|
|
—
|
|
|
|
(1)
Represents shares of restricted stock purchased in connection with employee tax withholding obligations under the 2010 Plan, which are not purchases made under the Company's publicly announced program.
(2)
On May 24, 2012, the Board authorized the repurchase of up to $100 million of the Company's common stock (the "Repurchase Program"), which may be made from time to time in open market or privately negotiated transactions. The Repurchase Program may be suspended, modified, or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the program.
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES.
|
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Exhibits. The following exhibits are filed or furnished with this Quarterly Report:
|
|
|
Exhibit
Number
|
Exhibit Description
|
10.1+
|
Form of Cash Performance Award between Michael Weiss and Express, Inc.
|
10.2+
|
Form of Stock Option Grant Agreement.
|
10.3+
|
Form of Performance Share Unit Agreement.
|
10.4+
|
Form of Amended and Restated Employment Agreement.
|
10.5+
|
Form of Amended and Restated Severance Agreement.
|
31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Principal Financial Officer and Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
XBRL Instance Document. *
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. *
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document. *
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document. *
|
+ Indicates a management contract or compensatory plan or arrangement.
* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
Date:
|
June 6, 2013
|
EXPRESS, INC.
|
|
|
|
|
|
|
By:
|
/s/ D. Paul Dascoli
|
|
|
|
D. Paul Dascoli
|
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
|
Exhibit 10.1
EXPRESS, INC.
2010 INCENTIVE COMPENSATION PLAN
CASH PERFORMANCE AWARD
Michael A. Weiss (the “
Grantee
”) is granted, effective as of April [ ], 2013, a cash performance award in an amount to be determined in accordance with Sections 1 and 2 hereof (the “
Award
”) pursuant to Article IX of the 2010 Incentive Compensation Plan (the “
Plan
”) of Express, Inc. (the “
Company
”). The Award is subject to the terms and conditions set forth below and in the Plan, which is incorporated by reference in, and made a part of, this Cash Performance Award Agreement (this “
Agreement
”). To the extent that there is a conflict between the terms of the Plan and this Agreement, the terms of the Plan shall govern. Any term not defined herein shall have the meaning assigned to such term in the Plan.
|
|
(i)
|
Subject to the provisions of this Section 1 and Section 2 hereof, the Award hereunder shall become earned and payable based upon the Company's relative “Total Shareholder Return” in terms of percentile ranking as compared to the S&P 500 over the period beginning on February 3, 2013 and ending on January 31, 2015 (the “
Measurement Period
”) in accordance with the schedule below. For purposes of the comparison to the S&P 500, if a company ceases to be included in the S&P 500 for any reason, such company shall cease to be considered part of the S&P 500 for purposes of determining performance during the Measurement Period, and Company performance hereunder shall be measured based on the component entities of the S&P 500 as of the commencement of the Measurement Period that remain in the S&P 500 as of the end of the Measurement Period.
|
|
|
|
Total Shareholder Return Ranking over Measurement Period
|
Payout Level
|
90th Percentile or Higher (Maximum)
|
$8,000,000
|
75th Percentile
|
$6,000,000
|
50th Percentile (Target)
|
$4,000,000
|
25th Percentile (Threshold)
|
$2,000,000
|
Below 25th Percentile
|
$—
|
To the extent that actual Total Shareholder Return for the Measurement Period hereunder is between specified payout levels, the amount earned and payable pursuant to the Award hereunder shall be determined on a pro rata basis using straight line interpolation;
provided
that no amount shall become earned and payable if the actual Total Shareholder Return level achieved for the Measurement Period is less than the Threshold level of performance set forth in the schedule above; and
provided
,
further
, that the maximum amount that may become earned and payable pursuant to the Award hereunder shall not exceed $8,000,000.
|
|
(ii)
|
For purposes hereof, the term “
Total Shareholder Return
” shall mean the percentage change in value (positive or negative) over the Measurement Period as measured by dividing (A) the sum of (I) the cumulative value of dividends and other distributions paid on the Common Stock (or the publicly traded common stock of the applicable S&P 500 company) for the Measurement Period, assuming the dividends are reinvested in such company's common stock effective as of the distribution “payment” date based on the closing price for such company, and (II) the difference (positive or negative) between each such company's “Starting Stock Price” and “Ending Stock Price,” by (B) the Starting Stock Price. The “
Starting Stock Price
”
|
for the Common Stock (or the publicly traded common stock of the applicable S&P 500 company) shall be the average of the closing prices for each trading day within the thirty (30)
trading days ending on the trading day before the first day of the Measurement Period. The “
Ending Stock Price
” for the Common Stock (or the publicly traded common stock of the applicable S&P 500 company) shall be the average of the closing prices for each trading day within the thirty (30)
trading days ending on the last trading day of the Measurement Period.
|
|
(b)
|
Conditions to Payment
. Payment of the Award hereunder shall be conditioned upon the Grantee's continued employment with the Company or its Subsidiaries through the end of the Measurement Period (except as otherwise provided in Section 2 hereof). To the extent possible, the Award hereunder is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.
|
|
|
(c)
|
Time and Form of Payment
. To the extent that the Award hereunder becomes earned in accordance with the terms and conditions of this Agreement, the Award shall be paid to the Grantee in cash within two and one-half months following the date on which the Award becomes earned hereunder as long as there is no conflict with Section 10 hereof. In no event whatsoever shall the Grantee have the ability to elect to defer payment of any portion of the Award.
|
|
|
(d)
|
Committee Authority
. The Committee shall in good faith make all determinations necessary or appropriate to determine whether the performance vesting conditions hereunder have been satisfied. The Committee's determinations shall be final, binding and conclusive upon all parties, absent manifest error or bad faith.
|
|
|
(e)
|
Adjustments
. In the event of an exchange, tender offer, merger, consolidation, recapitalization, split, combination or otherwise, the Committee shall make appropriate adjustments to the applicable Total Shareholder Return performance metrics to the extent necessary to reflect such event and preserve the intended economic benefits hereunder. The Committee's adjustment shall be made in accordance with the provisions of the Plan and shall be effective and final, binding and conclusive for all purposes of the Plan and this Agreement, absent manifest error or bad faith.
|
|
|
(f)
|
Forfeiture of Unearned Award
. Any portion of the Award hereunder that does not become earned in accordance with the provisions of this Agreement shall be automatically forfeited and cancelled for no value without any consideration being paid therefor and otherwise without any further action of the Company whatsoever.
|
|
|
(a)
|
General
. Except as provided in Section 2(b) and 2(c) hereof, in the event of the Grantee's termination of employment or other service with the Company and its Subsidiaries for any reason prior to the expiration of the Measurement Period, the Award hereunder shall be automatically forfeited and cancelled as of the date of such termination without any consideration being paid therefor and otherwise without any further action of the Company whatsoever. In the event of the Grantee's termination of employment with the Company and its Subsidiaries for any reason on or following expiration of the Measurement Period, the Grantee shall retain the right to receive payment of the Award hereunder in accordance with the provisions of Section 1 hereof,
provided
that upon a termination for Cause at any time prior to payment of the Award hereunder, the Award shall be automatically forfeited and cancelled for no value without any consideration being paid therefor and otherwise without any further action of the Company whatsoever.
|
|
|
(b)
|
Certain Terminations On or Following a Change in Control
. Notwithstanding any other provision herein to the contrary, in the event of a Change in Control prior to the expiration of the Measurement Period, the Award shall become immediately and fully earned using Total Shareholder Return
|
performance as of the Change in Control consummation date. The earned award will become vested and payable on the earlier of the expiration of the Measurement Period, the acquirer's failure to assume this Award Agreement, or the Grantee's termination of service (i) by the Company without Cause, (ii) by reason of the Grantee's death or Disability, or (iii) by the Grantee for “Good Reason” (as defined in the Employment Agreement by and between the Grantee and the Company dated February 12, 2010, as amended on each of April 14, 2010 and September 1, 2011).
|
|
(c)
|
Termination Due to Death or Disability
. Notwithstanding any other provision herein to the contrary, in the event of the Grantee's termination of employment with the Company due to death or Disability, the Award will become fully earned and vested using Total Shareholder Return performance as of the date of death or Disability and payable no later than five business days following Grantee's termination of employment due to death or Disability (as defined in the Employment Agreement by and between the Grantee and the Company dated February 12, 2010, as amended on each of April 14, 2010 and September 1, 2011).
|
|
|
3.
|
No Assignments
:
This Agreement is personal to each of the Company and the Grantee. Neither the Company nor the Grantee may assign, transfer or delegate any right or obligation hereunder without first obtaining the written consent of the other.
|
|
|
4.
|
Withholding Taxes
:
The Company may withhold from any and all amounts payable to the Grantee hereunder such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
|
|
|
5.
|
Governing Law
:
This Agreement shall be governed by, and construed under and in accordance with, the internal laws of the State of Delaware, without reference to rules relating to conflicts of laws.
|
|
|
6.
|
Other Benefits
:
The Award is an incentive award and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.
|
|
|
7.
|
No Right to Continued Employment or Service
:
Nothing in this Agreement shall confer upon the Grantee any right to continued employment or other service with the Company or its Subsidiaries, or to interfere in any way with the right of the Company or its Subsidiaries to terminate the Grantee's employment or other service at any time and for any reason (or no reason).
|
|
|
8.
|
Unfunded Benefit
:
The Award shall not be deemed to create a trust or other funded arrangement. The Grantee's rights with respect to the Award shall be those of a general unsecured creditor of the Company, and under no circumstances shall the Grantee have any other interest in any asset of the Company by virtue of the grant of the Award. Notwithstanding the foregoing, the Company shall have the right (but not the obligation) to implement or set aside funds in a grantor trust, subject to the claims of the Company's creditors or otherwise, to discharge its obligations with respect to the Award.
|
|
|
9.
|
Code Section 409A Compliance
:
Although the Company makes no guarantee with respect to the tax treatment of payment of the Award hereunder and shall not be responsible in any event with regard to non-compliance with Section 409A of the Code and the treasury regulations and other official guidance promulgated thereunder, this Agreement is intended to either comply with, or be exempt from, the requirements of Section 409A of the Code. To the extent that this Agreement is not exempt from the requirements of Section 409A of the Code, this Agreement is intended to comply with the requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. In no event whatsoever shall the Company be liable for any additional tax, interest, income inclusion or other penalty that may be imposed on the Grantee by Section 409A of the Code or for damages for failing to comply with Section 409A of the Code.
|
|
|
10.
|
Entire Agreement
:
This Agreement is subject to all of the terms, conditions and provisions of the Plan, including,
|
without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted thereunder and as may be in effect from time to time. This Agreement may be amended or modified only by a written instrument executed by the Company and the Grantee.
|
|
11.
|
Recoupment
:
The Grantee's
rights with respect to the Award hereunder shall in all events be subject to (i) any right that the Company may have under any Company recoupment policy or other agreement or arrangement with the Grantee, and (ii) any right or obligation that the Company may have regarding the clawback of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
|
*
*
*
*
*
*
EXPRESS, INC.
ACKNOWLEDGED AND AGREED:
Michael A. Weiss
Exhibit 10.2
NONQUALIFIED STOCK OPTION AGREEMENT
PURSUANT TO THE
EXPRESS, INC. 2010 INCENTIVE COMPENSATION PLAN
* * * * *
Participant:
________________________
Grant Date:
Per Share Exercise Price:
Number of Shares subject to this Option: _____________________
* * * * *
THIS NON-QUALIFIED STOCK OPTION AWARD AGREEMENT (this “
Agreement
”), dated as of the Grant Date specified above, is entered into by and between Express, Inc., a Delaware corporation (the “
Company
”), and the Participant specified above, pursuant to the Express, Inc. 2010 Incentive Compensation Plan, as in effect and as amended from time to time (the “
Plan
”), which is administered by the Committee; and
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the non‑qualified stock option provided for herein to the Participant.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:
1.
Incorporation By Reference; Plan Document Receipt
. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. No part of the Option granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Code.
2.
Grant of Option
. The Company hereby grants to the Participant, as of the Grant Date specified above, a non‑qualified stock option (this “
Option
”) to acquire from the Company at the Per Share Exercise Price specified above, the aggregate number of shares of Common Stock specified above (the “
Option Shares
”). Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant's interest in the Company for any reason. The Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by this Option
unless and until the Participant has become the holder of record of the shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such shares, except as otherwise specifically provided for in the Plan or this Agreement.
3.
[Vesting and Exercise
.
(a)
Vesting
. The Option subject to this grant shall become vested pursuant to the schedule set forth in the table below, provided the Participant is then employed by the Company and/or one of its Subsidiaries or Affiliates on the applicable vesting date. There shall be no proportionate or partial vesting in the periods prior to each vesting date and all vesting shall occur only on the appropriate vesting date, subject to the Participant's continued service with the Company or any of its Subsidiaries on each applicable vesting date.
|
|
|
Vesting Date
|
Cumulative Percentage
of Option Shares Vested
|
[_____________]
|
[_____________]
|
[_____________]
|
[_____________]
|
[_____________]
|
[_____________]
|
[_____________]
|
[_____________]
|
(b)
Vesting Upon Termination Due to Death or Disability
. Notwithstanding Section 4(a), in the event of Termination due to (i) the Participant's death or (ii) the Participant's Disability, the number of Option Shares subject to this Option that shall be vested at the time of Termination will be the number of Option Shares that would have been vested if Participant was employed on the first vesting date to occur after such Termination.
(c)
Effect of Detrimental Activity
. The provisions of Section 10.4 of the Plan regarding Detrimental Activity shall apply to the Option.
(d)
Expiration
. Unless earlier terminated in accordance with the terms and provisions of the Plan and/or this Agreement, all portions of this Option (whether vested or not vested) shall expire and shall no longer be exercisable after the expiration of ten (10) years from the Grant Date.
]
4.
Termination
.
Subject to the terms of the Plan and this Agreement, the Options, to the extent vested at the time of the Participant's Termination, shall remain exercisable as follows:
(a)
Termination due to Death or Disability
. In the event of the Participant's Termination by reason of death or Disability, the vested portion of this Option shall remain exercisable until the earlier of (i) one year from the date of such Termination, and (ii) the expiration of the stated term of the Option pursuant to Section 3 hereof.
(b)
Termination Without Cause
. In the event of the Participant's involuntary Termination by the Company without Cause, the vested portion of this Option shall remain exercisable until the earlier of (i) ninety (90) days from the date of such Termination, and (ii) the expiration of the stated term of the Option pursuant to Section 3 hereof.
(c)
Voluntary Termination
. In the event of the Participant's voluntary Termination, the vested portion of this Option shall remain exercisable until the earlier of (i) ninety (90) days from the date
of such Termination, and (ii) the expiration of the stated term of the Option pursuant to Section 3 hereof.
(d)
Termination for Cause.
In the event of the Participant's Termination by the Company for Cause, all Options granted hereunder (whether or not vested) shall terminate and expire upon such Termination.
(e)
Treatment of Unvested Options upon Termination
. Any portion of this Option that is not vested as of the date of the Participant's Termination for any reason shall terminate and expire as of the date of such Termination.
5.
Method of Exercise and Payment
. Subject to Section 8 hereof, to the extent that the Option has become vested and exercisable with respect to a number of shares of Common Stock as provided herein, the Option may thereafter be exercised by the Participant, in whole or in part, at any time or from time to time prior to the expiration of the Option as provided herein and in accordance with Sections 6.4(c) and 6.4(d) of the Plan, including, without limitation, by the delivery of any form of exercise notice as may be required by the Committee and payment in full of the Per Share Exercise Price multiplied by the number of shares of Common Stock underlying the portion of the Option exercised.
6.
Non-transferability
.
The Options, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit the Options to be Transferred to a Family Member for no value, provided that such Transfer shall only be valid upon execution of a written instrument in form and substance acceptable to the Committee in its sole discretion evidencing such Transfer and the transferee's acceptance thereof signed by the Participant and the transferee, and provided, further, that the Options may not be subsequently Transferred otherwise than by will or by the laws of descent and distribution or to another Family Member (as permitted by the Committee in its sole discretion) in accordance with the terms of the Plan and this Agreement, and shall remain subject to the terms of the Plan and this Agreement.
Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of or hypothecate in any way the Options, or the levy of any execution, attachment or similar legal process upon the Options, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.
7.
Governing Law
. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof.
8.
Withholding of Tax
.
The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant's FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the Option and, if the Participant fails to do so, the Company may otherwise refuse to issue or transfer any shares of Common Stock otherwise required to be issued pursuant to this Agreement. Any statutorily required withholding obligation with regard to the Participant may be satisfied by reducing the amount of cash or shares of Common Stock otherwise deliverable upon exercise of the Option.
9.
Entire Agreement; Amendment
. This Agreement, together with the Plan, contains
the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.
10.
Notices
. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the Chief Financial Officer of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company.
11.
No Right to Employment
. Any questions as to whether and when there has been a Termination and the cause of such Termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant's employment or service at any time, for any reason and with or without cause.
12.
Transfer of Personal Data
.
The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the Option awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan). This authorization and consent is freely given by the Participant.
13.
Compliance with Laws
. The issuance of this Option (and the Shares upon exercise of this Option) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and in each case any respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue this Option or any of the Shares pursuant to this Agreement if any such issuance would violate any such requirements.
14.
Section 409A
. Notwithstanding anything herein or in the Plan to the contrary, the Option is intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent.
15.
Binding Agreement; Assignment
. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign (except as provided by Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.
16.
Headings
. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.
17.
Counterparts
.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
18.
Further Assurances
. Each party hereto shall do and perform (or shall cause to be
done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.
19.
Severability
. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
20.
Acquired Rights
. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of Options made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the Options awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant's ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF
, the parties hereto have executed this Agreement as of the date first written above.
EXPRESS, INC.
PARTICIPANT
Exhibit 10.3
RESTRICTED STOCK UNIT AGREEMENT
PURSUANT TO THE
EXPRESS, INC. 2010 INCENTIVE COMPENSATION PLAN
* * * * *
Participant:
Grant Date:
Number of Restricted Stock Units granted:
* * * * *
THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “
Agreement
”), dated as of the Grant Date specified above, is entered into by and between Express, Inc., a Delaware corporation organized in the State of Delaware (the “
Company
”), and the Participant specified above, pursuant to the Express, Inc. 2010 Incentive Compensation Plan, as in effect and as amended from time to time (the “
Plan
”), which is administered by the Committee; and
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“
RSUs
”) provided herein to the Participant.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:
1.
Incorporation By Reference; Plan Document Receipt
. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
2.
Grant of Restricted Stock Unit Award
. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of RSUs specified above. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant's interest in the Company for any reason. Subject to Section 5, the Participant shall not have the rights of a stockholder in respect of the shares underlying this Award until such shares are delivered to the Participant in accordance with Section 4.
3.
[Vesting and Payment.
(a)
Performance-Based Vesting
. Subject to the provisions of Section 3(b) hereof, the RSUs subject to this grant shall become tentatively vested based on performance as based on the Company's achievement of varying levels of “Adjusted Earnings Per Diluted Share” for the performance period beginning on [__________] and ending on [_______] in accordance with the following schedule:
|
|
|
|
Adjusted Earnings Per Diluted Share
|
Performance Level
|
Number of RSUs Tentatively Vested Based on Performance
|
[______]
|
Threshold
|
[______]
|
[______]
|
Target
|
[______]
|
[______]
|
Maximum
|
[______]
|
For purposes hereof, the performance metric of “
Adjusted Earnings Per Diluted Share
” means the Company's earnings per diluted share calculated in accordance with generally accepted accounting principles, adjusted to exclude the impact of any non-core operating costs consistent with past practice for debt extinguishment and one-time transaction costs. To the extent that actual Adjusted Earnings Per Diluted Share for the performance period hereunder is between the Threshold level and the Target level or between the Target level and the Maximum level, the number of RSUs to become tentatively vested hereunder based on performance shall be determined on a pro rata basis using straight line interpolation and rounding down to the nearest whole unit;
provided
that no RSUs shall become tentatively vested based on performance if the actual Adjusted Earnings Per Diluted Share level achieved for the performance period is less than the Threshold level of performance set forth in the schedule above; and
provided
,
further
, that the maximum number of RSUs that may become tentatively vested based on performance shall not exceed the number of RSUs set forth in the schedule above corresponding to the Maximum level of performance set forth in the schedule above.
(b)
Time-Based Vesting
. To the extent that the RSUs become tentatively vested based on performance pursuant to Section 3(a) hereof, such tentatively vested RSUs shall become unrestricted and fully vested pursuant to the schedule set forth in the table below, provided that the Participant has not incurred a Termination prior to each such vesting date:
|
|
|
Vesting Date
|
Cumulative Percentage
of Performance Vested RSUs to Become Fully Vested
|
[______]
|
[______]
|
[______]
|
[______]
|
[______]
|
[______]
|
[______]
|
[______]
|
There shall be no proportionate or partial vesting under this Section 3(b) in the periods prior to each vesting date and all vesting under this Section 3(b) shall occur only on the appropriate vesting date, subject to the Participant's continued service with the Company or any of its Subsidiaries on each applicable vesting date.
(c)
Certain Terminations
. Notwithstanding Section 3(b), in the event of Termination due to (i) the Participant's death or (ii) the Participant's Disability, the number of RSUs subject to this grant that shall be unrestricted and fully vested at the time of Termination will be the number of RSUs that would have become unrestricted and fully vested if the Participant was employed on the anniversary of the Grant Date specified above occurring immediately following the date of such Termination.
(d)
Effect of Detrimental Activity
. The provisions of Section 10.4 of the Plan regarding Detrimental Activity shall apply to the RSUs.
(e)
Forfeiture
. Subject to Section 3(c), all unvested RSUs shall be immediately forfeited upon the Participant's Termination for any reason.
]
(a)
General
. Subject to Section 4(b) and the provisions of the Plan, the Company shall deliver to the Participant on the date on which the RSUs become unrestricted and fully vested hereunder the number of shares of Common Stock equal to the number of RSUs that become unrestricted and fully vested on such date. In no event shall a Participant be entitled to receive any shares with respect to any unvested or forfeited portion of the RSU.
(b)
Blackout Periods
. If the Participant is subject to any Company “blackout” policy or other trading restriction imposed by the Company on the date such distribution would otherwise be made pursuant to Section 4(a), such distribution shall be instead made on the earlier of (i) the date the Participant is not subject to any such policy or restriction and (ii) the later of (A) the end of the calendar year in which such distribution would otherwise have been made and (B) a date that is immediately prior to two and one-half (2.5) months following the date such distribution would otherwise have been made.
5.
Dividends and Other Distributions
.
Participants
holding RSUs shall be entitled to receive all dividends and other distributions paid with respect to such shares, provided that any such dividends or other distributions will be subject to the same vesting requirements as the underlying RSUs and shall be paid at the time the RSUs become vested pursuant to Section 3. If any dividends or distributions are paid in shares, the shares shall be deposited with the Company and shall be subject to the same restrictions on transferability and forfeitability as the RSUs with respect to which they were paid.
6.
Non-transferability
.
The RSUs, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of or hypothecate in any way the RSUs, or the levy of any execution, attachment or similar legal process upon the RSUs, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.
7.
Governing Law
. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof.
8.
Withholding of Tax
.
The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant's FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the RSUs and, if the Participant fails to do so, the Company may otherwise refuse to issue or transfer any shares of Common Stock otherwise required to be issued pursuant to this Agreement. Any statutorily required withholding obligation with regard to the Participant may be satisfied by reducing the amount of cash or shares of Common Stock otherwise
deliverable to the Participant hereunder.
9.
Entire Agreement; Amendment
. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.
10.
Notices
. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the Chief Financial Officer of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company.
11.
No Right to Employment
. Any questions as to whether and when there has been a Termination and the cause of such Termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant's employment or service at any time, for any reason and with or without cause.
12.
Transfer of Personal Data
. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the RSU awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan). This authorization and consent is freely given by the Participant.
13.
Compliance with Laws
. This issuance of RSUs (and the shares underlying the RSUs) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and in each case any respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue this RSU or any of the shares pursuant to this Agreement if any such issuance would violate any such requirements.
14.
Binding Agreement; Assignment
. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign (except as provided by Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.
15.
Headings
. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.
16.
Counterparts
.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
17.
Further Assurances
. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates,
instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.
18.
Severability
. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
19.
Acquired Rights
. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of RSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the RSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant's ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.
* * * * *
IN WITNESS WHEREOF
, the parties hereto have executed this Agreement as of the date first written above.
EXPRESS, INC.
PARTICIPANT
Exhibit 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “
Agreement
”) is entered into between Express, LLC (hereinafter the “
Company
”), and [__________] (the “
Executive
”) (hereinafter collectively referred to as “the parties”) and is effective on the date of execution by the parties.
WHEREAS, the Executive is employed as the [TITLE] for Express, LLC and is experienced in various phases of the Company's business and does possess an intimate knowledge of the business and affairs of the Company and its policies, procedures, methods, and personnel; and
WHEREAS, the Company has determined that it is essential and in its best interests to retain the services of key management personnel and to ensure their continued dedication and efforts; and
WHEREAS, this Agreement supersedes and replaces in its entirety that certain [REFERENCE TO EXISTING EMPLOYMENT AGREEMENT] (the “
Prior Agreement
”) or any other employment or severance agreement entered into by the Executive, on the one hand, and the Company or its affiliates, on the other (as well as any employment or severance agreement that was entered into by the Executive and Limited Brands, Inc. or its affiliates and assumed by the Company or its affiliates)
provided
,
however
, nothing in this Agreement shall cancel or modify any previous grant of units which was previously granted to the Executive or any rights to repurchase such units. Upon execution of this Agreement, the Prior Agreement shall cease to have any further legal force or effect whatsoever.
NOW, THEREFORE, in consideration of the foregoing and the respective agreements of the parties contained herein, the parties hereby agree as follows:
1.
Term
. The initial term of employment under this Agreement shall be for the period commencing on the effective date of the Prior Agreement (the “
Commencement Date
”) and ending on the fifth
anniversary of the Commencement Date;
provided
,
however
, that thereafter this Agreement shall be automatically renewed from year to year, unless (a) either the Company or the Executive shall have given written notice to the other at least thirty (30) days prior thereto that the term of this Agreement shall not be so renewed or (b) the Agreement is terminated pursuant to the provisions of
Section 8
of this Agreement.
2.
Employment
.
(a)
Position
. The Executive shall be employed as [TITLE] or such other position of reasonably comparable or greater status and responsibilities, as may be determined by the Company's board of managers (the “
Board
”). The Executive shall perform the duties, undertake the responsibilities, and exercise the authority customarily performed, undertaken, and exercised by persons employed in a similar executive capacity. The Executive shall report to [TITLE OF PERSON] or such other designee appointed by [TITLE OF PERSON].
(b)
Obligations
. The Executive agrees to devote the Executive's full business time and attention to the business and affairs of the Company. The foregoing, however, shall not preclude the Executive from serving on corporate, civic, or charitable boards or committees or managing personal investments, so long as such activities do not interfere with the performance of the Executive's responsibilities hereunder.
3.
Base Salary
. The Company agrees to pay the Executive an annual base salary at the rate of
[
__________ ($_______)
]
, less applicable withholding (the “
Base Salary
”). The Base Salary will be
subject to annual review and may be increased from time to time in the discretion of the Company, based on factors such as the Executive's responsibilities, compensation of similar executives within the Company and in other companies, the Executive's performance, and other pertinent factors. Such Base Salary shall be payable in accordance with the Company's customary practices applicable to its executives.
4.
Equity Compensation
. The Executive may be eligible for future equity-based awards as may be commensurate with the Executive's position and performance; it being agreed any such awards shall be awarded, if at all, in the discretion of the Compensation Committee of the Board of Directors of Express, Inc.
5.
Employee Benefits
. The Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company and made available to senior executives generally and as may be in effect from time to time. The Executive's participation in such plans, practices and programs shall be on the same basis and terms as are applicable to senior executives of the Company generally.
6.
Bonus
. The Executive shall be entitled to participate in the Company's applicable incentive compensation plan at a target level of
[
__________ (__%)
]
of the Executive's Base Salary on such terms and conditions as determined from time to time by the Board. The target level may be increased from time to time in the discretion of the Company, based on factors such as the Executive's responsibilities, compensation of similar executives within the Company and in other companies, the Executive's performance, and other pertinent factors.
7.
Other Benefits
.
(a)
Expenses
. Subject to applicable Company policies, the Executive shall be entitled to receive prompt reimbursement of all expenses reasonably incurred in connection with the performance of the Executive's duties hereunder or for promoting, pursuing, or otherwise furthering the business or interests of the Company. For purposes of compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”), (i) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive, (ii) any right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(b)
Office and Facilities
. The Executive shall be provided with appropriate offices and with such secretarial and other support facilities as are commensurate with the Executive's status with the Company and adequate for the performance of the Executive's duties hereunder.
(c)
Paid Time Off (PTO) Program
. The Executive shall be entitled to paid time off in accordance with the policies as periodically established by the Company for senior executives of the Company.
8.
Termination
. The Executive's employment hereunder is subject to the following terms and conditions:
(a)
Disability
. The Company shall be entitled to terminate the Executive's employment after having established the Executive's Disability. For purposes of this Agreement, “
Disability
” means a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's
duties under this Agreement for a period of at least six (6) months in any twelve (12)-month calendar period as determined in accordance with the Company's Long-Term Disability Plan or, in the absence of such plan, as determined by the Board.
(b)
Cause
. The Company shall be entitled to terminate the Executive's employment for “Cause” without prior written notice. For purposes of this Agreement, “
Cause
” shall mean that the Executive
(1) failed to perform the Executive's material duties with the Company (other than a failure resulting from the Executive's incapacity due to physical or mental illness); or (2) has pleaded “guilty” or “no contest” to or has been convicted of an act which is defined as a felony under federal or state law; or (3) engaged in misconduct in bad faith which could reasonably be expected to materially harm the Company's business or its reputation. The Executive shall be given written notice by the Company of a termination for Cause, which shall state in detail the particular act or acts or failures to act that constitute the grounds on which the termination for Cause is based.
(c)
Termination by the Executive
. The Executive may terminate employment hereunder without “Good Reason” by delivering to the Company, not less than thirty (30) days prior to the Termination Date, a written notice of termination. The Executive may terminate employment hereunder for "Good Reason" by delivering to the Company not less than thirty (30) days prior to the Termination Date, a written notice of termination setting forth in reasonable detail the facts and circumstances which constitute Good Reason. For purposes of this Agreement, “
Good Reason
” shall mean the occurrence of any of the following events, without the express written consent of the Executive, unless such events are fully corrected in all material respects by the Company within thirty (30) days following written notification by the Executive to the Company of the occurrence of one of the following reasons: (i) the failure to continue the Executive in a capacity contemplated by
Section 2(a)
above; (ii) the assignment to the Executive of any duties materially inconsistent with the Executive's positions, material duties, authority, responsibilities or reporting requirements as set forth in
Section 2(a)
hereof; (iii) a reduction in or a material delay in payment of the Executive's total cash compensation and benefits from those required to be provided in accordance with the provisions of this Agreement; (iv) the Company, the Board or any person controlling the Company requires the Executive to be based outside of the United States, other than on travel reasonably required to carry out the Executive's obligations under the Agreement; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within fifteen (15) days after a Change in Control (defined below). The Executive shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within thirty (30) days after the first occurrence of such circumstances, and actually terminate employment within thirty (30) days following the expiration of the Company's thirty (30)-day cure period described above. Otherwise, any claim of such circumstances as “Good Reason” shall be deemed irrevocably waived by the Executive.
(d)
Termination Date, Etc
. “
Termination Date
” shall mean in the case of the Executive's death, the date of death, or in all other cases of termination by the Company, the date specified in writing by the Company as the Termination Date;
provided
,
however
, that if the Executive's employment is terminated by the Company either for (i) reasons other than Cause or (ii) Disability, the date specified as the Termination Date shall be at least thirty (30) days from the date that written notice of the termination date is given to the Executive.
9.
Compensation Upon Certain Terminations by the Company
.
(a)
If the Executive's employment is terminated by the Company other than for death,
Disability or Cause (including a termination by reason of the Company's written notice to the Executive of its decision not to extend the Agreement pursuant to
Section 1
hereof) or by the Executive for Good Reason, the Company's sole obligations hereunder shall be as follows:
|
|
(i)
|
The Company shall pay the Executive the Accrued Compensation;
|
|
|
(ii)
|
Subject to
Section 9(f)
and the Executive's continued compliance with
Section 10
hereof:
|
(1)
The Company shall continue to pay the Executive the Base Salary for a period of eighteen (18) months following the Termination Date;
(2)
The Company shall pay the Executive any incentive compensation under the plan described in
Section 6
that the Executive would have received if the Executive had remained employed with the Company for a period of one (1) year after the Termination Date; and
(3)
Subject to the Executive's timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“
COBRA
”), for up to eighteen (18) months following the Termination Date, the Company shall, at its expense, provide to the Executive and the Executive's dependents medical and dental benefits similar in the aggregate to those provided to the Executive immediately prior to the Termination Date;
provided
,
however
, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's right to continue such medical and dental benefits under applicable law (such as COBRA);
provided
,
further
, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this
Section 9(a)(ii)(3)
if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable).
(b)
If during the term of the Agreement (including any extensions thereof), the Executive's employment is terminated by the Company for Cause or by reason of the Executive's death, or if the Executive gives the Company a written notice of termination other than one for Good Reason, the Company's sole obligation hereunder shall be to pay the Executive the following amounts earned hereunder but not paid as of the Termination Date: (i) Base Salary, (ii) reimbursement for any and all monies advanced or expenses incurred pursuant to
Section 7(a)
through the Termination Date, and (iii) any earned compensation which the Executive had previously deferred (including any interest earned or credited thereon) pursuant to the Company's Supplemental Retirement Plan (collectively, the “
Accrued Compensation
”). The Executive's entitlement to any other benefits shall be determined in accordance with the Company's employee benefit plans then in effect.
(c)
If the Executive's employment is terminated by the Company by reason of the Executive's Disability, the Company's sole obligations hereunder shall be as follows:
|
|
(i)
|
the Company shall pay the Executive the Accrued Compensation; and
|
|
|
(ii)
|
the Executive shall be entitled to receive any disability benefits available under the
|
Company's Long-Term Disability Plan.
(d)
This
Section 9(d)
shall apply if there is a termination of the Executive's employment (i) by the Company other than for death, Disability or Cause (including a termination by reason of the Company's written notice to the Executive of its decision not to extend the Agreement pursuant to
Section 1
hereof) or (ii) by the Executive for Good Reason, in each case, either (A) during the
one-year period following a Change in Control or (B) during the six (6) month period preceding a Change in Control;
provided
that to the extent a termination occurs pursuant to the foregoing clause (B), the Executive shall receive the benefits described in
Section 9(a)
in accordance with the terms thereof and any additional benefits provided in this
Section 9(d)
shall be paid in accordance with the terms hereof;
provided
further
that if a Change in Control subsequently occurs, the unpaid balance of the benefits provided in
Section 9(a)
shall be provided in accordance with this
Section 9(d)
. If any termination described in this
Section 9(d)
occurs, the Executive (or the Executive's estate, if the Executive dies after such termination and execution of the release but before receiving such amount) shall receive the following:
|
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(i)
|
The Company shall pay the Executive the Accrued Compensation;
|
|
|
(ii)
|
Subject to
Section 9(f)
and the Executive's continued compliance with
Section 10
hereof:
|
(1)
A lump sum payment of an amount equal to one and one-half (1.5) times the Executive's target annual cash incentive bonus for the fiscal year in which the Termination Date occurs, payable within thirty (30) days following the Termination Date;
(2)
The Company shall pay the Executive an amount equal to two (2.0) times the Base Salary, payable in a lump sum within thirty (30) days following the Termination Date;
provided
that to the extent a Change in Control is not a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Code Section 409A then, notwithstanding the foregoing, any amount payable under this
Section 9(d)(ii)(2)
which constitutes “nonqualified deferred compensation” for purposes of Code Section 409A shall be payable in pro-rata equal installments over the two (2) year period following the Termination Date in accordance with
Section 9(e)
hereof;
(3)
Subject to the Executive's timely election of continuation coverage under COBRA, for up to eighteen (18) months following the Termination Date, the Company shall, at its expense, provide to the Executive and the Executive's dependents medical and dental benefits similar in the aggregate to those provided to the Executive immediately prior to the Termination Date;
provided
,
however
, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's right to continue such medical and dental benefits under applicable law (such as COBRA);
provided
,
further
, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this
Section 9(d)(ii)(3)
if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as
amended (to the extent applicable); and
(4)
Immediate accelerated vesting of all outstanding equity-based incentive awards (using, if applicable, the goal (100%) level of achievement under the respective award agreement to determine such number).
For purposes of this Agreement, “
Change in Control
” shall have the meaning ascribed thereto in the Express, Inc. 2010 Incentive Compensation Plan, as amended from time to time.
(e)
Except as otherwise expressly set forth herein, the amounts payable to the Executive pursuant to this
Section 9
will be paid to the Executive at such times as the Executive would have otherwise been entitled to receive such amounts had the Executive not been terminated (determined in accordance with the Company's payroll practices at the time of termination) and only so long as the Executive has not breached the provisions of
Section 10
hereof or any other restrictive covenant and/or non-competition agreement between the Executive and the Company or any of its affiliates.
(f)
The parties acknowledge and agree that damages that will result to the Executive for termination by the Company of the Executive's employment without Cause or by the Executive for Good Reason shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to the Executive under
Section 9(a)
or
Section 9(d)
beyond the Accrued Compensation shall constitute liquidated damages for any such termination. The Executive agrees that such liquidated damages shall be in lieu of all other claims that the Executive may make by reason of any such termination of employment. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the Accrued Compensation shall only be payable if the Executive delivers to the Company and does not revoke a general release of claims in favor of the Company in a form satisfactory to the Company. Such release must be executed and delivered (and no longer subject to revocation, if applicable) within 60 days following the Termination Date. Notwithstanding anything to the foregoing set forth herein, to the extent that the payment of any amount described in
Section 9(a)
or
Section 9(d)
constitutes “nonqualified deferred compensation” for purposes of Code Section 409A, any such payment scheduled to occur during the first 60 days following the Termination Date shall not be paid until the first regularly scheduled pay period following the 60th day following such termination and shall include payment of any amount that was otherwise scheduled to be paid prior thereto.
(g)
Executive shall not be required to mitigate the amount of any payment provided for in this
Section 9
by seeking other employment or otherwise and no such payment or benefit shall be eliminated, offset or reduced by the amount of any compensation provided to the Executive in any subsequent employment, except as provided in
Section 9(a)(ii)(3)
or
Section 9(d)(ii)(3)
.
(h)
Except as otherwise expressly provided in
Section 9
above, all of the Executive's rights to salary, bonuses, fringe benefits and other compensation hereunder (if any) which accrue or become payable after the Termination Date will cease upon the Termination Date. The Executive's termination of employment with the Company for any reason shall be deemed to automatically remove the Executive, without further action, from any and all offices held by Executive with the Company or its affiliates. The Executive shall execute such additional documents as requested by the Company from time to time to evidence the foregoing.
(i)
Notwithstanding any other payment schedule provided herein to the contrary, if the Executive is deemed on the Termination Date to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then each of the following shall apply:
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(i)
|
With regard to any payment that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment shall be made on the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive's death (the “
Delay Period
”) to the extent required under Code Section 409A. Upon the expiration of the Delay Period, all payments delayed pursuant to this Section shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and
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(ii)
|
To the extent that any benefits to be provided during the Delay Period is considered deferred compensation under Code Section 409A provided on account of a “separation from service,” and such benefits are not otherwise exempt from Code Section 409A, the Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse the Executive, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to the Executive, the Company's share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.
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(j)
The Company may deduct or withhold from any amounts owing from the Company to Executive all federal, state and local income, employment or other taxes as may be required to be withheld by any applicable law or regulation.
10.
Employee Covenants
.
(a)
For the purposes of this
Section 10
, the term “
Company
” shall include Express, LLC, and all of its subsidiaries, parent companies and affiliates thereof.
(b)
Confidentiality
. The Executive shall not, during the term of this Agreement and thereafter, make any Unauthorized Disclosure. For purposes of this Agreement, “
Unauthorized Disclosure
” shall mean use by the Executive for
the Executive's own benefit, or disclosure by the Executive to any person other than a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company or as may be legally required, of any confidential information relating to the business or prospects of the Company (including, but not limited to, any information and materials pertaining to any Intellectual Property as defined below);
provided
,
however
, that Unauthorized Disclosure shall not include the use or disclosure by the Executive of any publicly available information (other than information available as a result of disclosure by the Executive in violation of this
Section 10(b)
). This confidentiality covenant has no temporal, geographical or territorial restriction.
(c)
Non-Competition
. During the Non-Competition Period described below, the Executive shall not, directly or indirectly, without the prior written consent of the Board, own, manage, operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner, or otherwise), any business, individual, partner, firm, corporation, or other entity that competes or plans to compete, directly or indirectly, with the Company or any of its products;
provided
,
however
,
that
the “beneficial ownership” by the Executive after termination of employment with the Company, either individually or as a member of a “group,” as such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended
(the “
Exchange Ac
t”), of not more than two percent (2%) of the voting stock of any publicly held corporation shall not be a violation of
Section 10
of this Agreement.
The “
Non-Competition Period
” means the period the Executive is employed by the Company plus one (1) year from the Termination Date.
(d)
Non-Solicitation
. During the No-Raid Period described below, the Executive shall not directly or indirectly solicit, induce or attempt to influence any employee to leave the employment of the Company, nor assist anyone else in doing so. Further, during the No-Raid Period, the Executive shall not, either directly or indirectly, alone or in conjunction with another party, interfere with or harm, or attempt to interfere with or harm, the relationship of the Company, with any person who at any time was an employee, customer or supplier of the Company, or otherwise had a business relationship with the Company.
The “
No-Raid Period
” means the period the Executive is employed by the Company plus one (1) year from the Termination Date.
(e)
Intellectual Property
. The Executive agrees that all inventions, designs and ideas conceived, produced, created, or reduced to practice, either solely or jointly with others, during the Executive's employment with the Company including those developed on the Executive's own time, which relate to or are useful in the Company's business (“
Intellectual Property
”) shall be owned solely by the Company. The Executive understands that whether in preliminary or final form, such Intellectual Property includes, for example, all ideas, inventions, discoveries, designs, innovations, improvements, trade secrets, and other intellectual property. All Intellectual Property is either work made for hire for the Company within the meaning of the United States Copyright Act, or, if such Intellectual Property is determined not to be work made for hire, then the Executive irrevocably assigns all rights, titles and interests in and to the Intellectual Property to the Company, including all copyrights, patents, and/or trademarks. The Executive agrees to, without any additional consideration, execute all documents and take all other actions needed to convey the Executive's complete ownership of the Intellectual Property to the Company so that the Company may own and protect such Intellectual Property and obtain patent, copyright and trademark registrations for it. The Executive also agrees that the Company may alter or modify the Intellectual Property at the Company's sole discretion, and the Executive waives all right to claim or disclaim authorship. The Executive represents and warrants that any Intellectual Property that the Executive assigns to the Company, except as otherwise disclosed in writing at the time of assignment, will be the Executive's sole exclusive original work. The Executive also represents that the Executive has not previously invented any Intellectual Property or has advised the Company in writing of any prior inventions or ideas.
(f)
Remedies
. The Executive agrees that any breach of the terms of this
Section 10
would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law; the Executive therefore also agrees that in the event of said breach or any threat of breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive, without having to prove damages. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Executive. The Executive and the Company further agree that the confidentiality provisions and the covenants not to compete and solicit contained in this
Section 10
are reasonable and that the Company would not have entered into this Agreement but for the inclusion of such covenants herein. The parties agree that the prevailing party shall be entitled to all costs and expenses, including reasonable attorneys' fees and costs, in addition to any other remedies to which either may be entitled at law or in equity. Should a court determine, however, that any provision of
the covenants is unreasonable, either in period of time, geographical area, or otherwise, the parties hereto agree that the covenant should be interpreted and enforced to the maximum extent which such court deems reasonable. In the event of any violation of the provisions of this
Section 10
, the Executive acknowledges and agrees that the post-termination restrictions contained in this
Section 10
shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation. In the event of a material violation by the Executive of this
Section 10
, any severance being paid to the Executive pursuant to this Agreement or otherwise shall immediately cease, and any severance previously paid to the Executive shall be immediately repaid to the Company.
(g)
The provisions of this
Section 10
shall survive any termination of this Agreement, and the existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this
Section 10
.
11.
Employee Representation
. The Executive expressly represents and warrants to the Company that the Executive is not a party to any contract or agreement and is not otherwise obligated in any way, and is not subject to any rules or regulations, whether governmentally imposed or otherwise, which will or may restrict in any way the Executive's ability to fully perform the Executive's duties and responsibilities under this Agreement.
12.
Successors and Assigns
.
(a)
This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term “the Company” as used herein shall include any such successors and assigns to the Company's business and/or assets. The term “successors and assigns” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise.
(b)
Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative.
13.
Arbitration
. Except with respect to the remedies set forth in
Section 10(f)
hereof, any controversy or claim between the Company or any of its affiliates and the Executive arising out of or relating to this Agreement or its termination shall be settled and determined by a single arbitrator whose award shall be accepted as final and binding upon the parties. The American Arbitration Association, under its Employment Arbitration Rules, shall administer the binding arbitration. The arbitration shall take place in Columbus, Ohio. The Company and the Executive each waive any right to a jury trial or to a petition for stay in any action or proceeding of any kind arising out of or relating to this Agreement or its termination and agree that the arbitrator shall have the authority to award costs and attorney fees to the prevailing party.
14.
Notice
. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the notice of termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows:
To the Executive
:
[_________]
[_________]
[_________]
To the Company
:
Express, LLC
1 Express Drive
Columbus, OH 43230
Attn: Executive Vice President - Human Resources
15.
Settlement of Claims
. The Company may offset any amounts the Executive owes it or its subsidiaries or affiliates against any amounts it owes the Executive hereunder.
16.
Miscellaneous
. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
17.
Governing Law
. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Ohio without giving effect to the conflict of law principles thereof.
18.
Severability
. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
19.
Entire Agreement
. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.
20.
Section 409A Compliance
. The intent of the parties is that payments and benefits under this Agreement comply with Code Section 409A and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,”
“termination of employment” or like terms shall mean “separation from service.” For purposes of Code Section 409A, the Executive's right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.
EXPRESS, LLC
[NAME OF EXECUTIVE]
Date:
Exhibit 10.5
AMENDED AND RESTATED SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (this “
Agreement
”), is entered into between Express, LLC, a Delaware limited liability company (the “
Company
”), and [•] (the “
Executive
”) as of [•], 2013 (the “
Effective Date
”).
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the terms on which the Executive may be entitled to severance benefits from the Company.
WHEREAS, this Agreement supersedes and replaces in its entirety that certain Severance Agreement, dated [__], between Express, LLC and Executive and any other agreement entered into between the Executive and the Company (or any of its affiliates) prior to the Effective Date of the same subject matter.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the Executive hereby agree as follows:
1.
At-Will Nature of Employment
. The Executive acknowledges and agrees that the Executive's employment with the Company is and shall remain “at-will” and the Executive's employment with the Company may be terminated at any time and for any reason (or no reason) by the Company or the Executive, with or without notice, subject to the terms of this Agreement. During the period of the Executive's employment with the Company, the Executive shall perform such duties and fulfill such responsibilities as reasonably requested by the Company from time to time commensurate with the Executive's position with the Company.
(a)
Termination of Employment by the Company
. The Company may terminate the Executive's employment at any time with or without Cause (as defined below). For purposes of this Agreement, “
Cause
” shall mean that the Executive (1) failed to perform the Executive's material duties with the Company (other than a failure resulting from the Executive's incapacity due to physical or mental illness); or (2) has pleaded “guilty” or “no contest” to or has been convicted of an act which is defined as a felony under federal or state law; or (3) engaged in misconduct in bad faith which could reasonably be expected to materially harm the Company's business or its reputation. The Executive shall be given written notice by the Company of a termination for Cause, which shall state in detail the particular act or acts or failures to act that constitute the grounds on which the termination for Cause is based.
(b)
Termination of Employment by the Executive
. The Executive may terminate employment hereunder without “Good Reason” by delivering to the Company, not less than thirty (30) days prior to the Termination Date, a written notice of termination. The Executive may terminate employment hereunder for “Good Reason” by delivering to the Company not less than thirty (30) days prior to the Termination Date, a written notice of termination setting forth in reasonable detail the facts and circumstances which constitute Good Reason. For purposes of this Agreement, “
Good Reason
” shall mean the occurrence of any of the following events, without the express written consent of the Executive, unless such events are fully corrected in all material respects by the Company within thirty (30) days following written notification by the Executive to the Company of the occurrence of one of the following reasons: (i) the assignment to the Executive of any duties materially inconsistent with the Executive's positions, material duties, authority, responsibilities or reporting requirements with the Company; (ii) a reduction in or a material delay in payment of the Executive's total cash compensation; (iii) the Company requires the Executive to be based outside of the United States, other than on travel reasonably required to carry out the Executive's duties to the Company; or (iv) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within fifteen (15) days after a Change in Control (as defined below). The Executive shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within thirty (30) days after the first occurrence of such circumstances, and actually terminate employment within thirty (30) days following the expiration of the Company's thirty (30)-day cure period described above. Otherwise, any claim of such circumstances as “Good Reason” shall be deemed irrevocably waived by the Executive.
(c)
Termination of Employment due to Death or Disability
. The Executive's employment shall terminate upon the Executive's death or Disability (defined below).
(d)
Notice of Termination
. Any termination of the Executive's employment by the Company or by the Executive shall be communicated by a written Notice of Termination addressed to the Executive or the Company, as applicable. A “
Notice of Termination
”
shall mean a notice stating that the Executive's employment with the Company has been or will be terminated and the specific provisions of this
Section 1
under which such termination is being effected.
2.
Compensation Upon Certain Terminations by the Company
.
(a)
If the Executive's employment is terminated (i) by the Company other than for Cause, death or Disability or (ii) by the Executive for Good Reason, the Company's sole obligations hereunder shall be as follows:
(i)
the Company shall pay the Executive the Accrued Compensation (defined below);
(ii)
subject to
Section 2(f)
and the Executive's continued compliance with the obligations in
Sections 3
hereof:
(1)
The Company shall continue to pay the Executive the Executive's base salary in effect on the Termination Date for a period of eighteen months (18) months following the Termination Date;
(2)
The Company shall pay the Executive any cash incentive compensation that the Executive would have received if the Executive had remained employed with the Company for a period of one (1) year after the Termination Date; and
(3)
Subject to the Executive's timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“
COBRA
”), for up to eighteen (18) months following the Termination Date, the Company shall, at its expense, provide to the Executive and the Executive's beneficiaries medical and dental benefits similar in the aggregate to the those provided to the Executive immediately prior to the Termination Date;
provided
,
however
, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's right to continue such medical and dental benefits under applicable law (such as COBRA);
provided
,
further
, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this
Section 2(a)(ii)(3)
if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable).
For purposes of this Agreement, “
Termination Date
” shall mean in the case of the Executive's death or Disability, the date of death or Disability, or in all other cases of termination by the Company or the Executive, the date specified in writing by the Company or the Executive as the Termination Date in accordance with
Section 1
.
(b)
If the Executive's employment is terminated by the Company for Cause, by the Executive without Good Reason or by reason of the Executive's death, the Company's sole obligation hereunder shall be to pay the Executive the following amounts: (i) any earned and unpaid base salary, (ii) reimbursement for any and all monies advanced or expenses incurred through the Termination Date, and (iii) any earned compensation which the Executive had previously deferred (including any interest earned or credited thereon) pursuant to the Company's Supplemental Retirement Plan (collectively, the “
Accrued Compensation
”). The Executive's entitlement to any other benefits shall
be determined in accordance with the Company's employee benefit plans then in effect.
(c)
If the Executive's employment is terminated by the Company by reason of the Executive's Disability, the Company's sole obligations hereunder shall be as follows:
(i)
the Company shall pay the Executive the Accrued Compensation; and
(ii)
the Executive shall be entitled to receive any disability benefits available under the Company's Long-Term Disability Plan (if any).
(iii)
For purposes of this Agreement, “
Disability
” means a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties under this Agreement for a period of at least six (6) months in any twelve (12)-month calendar period as determined in accordance with the Company's Long-Term Disability Plan or, in the absence of such plan, as determined by the Company's Board.
(d)
This
Section 2(d)
shall apply if there is a termination of the Executive's employment (i) by the Company other than for Cause, death or Disability or (ii) by the Executive for Good Reason, in each case, either (A) during the
one-year period following a Change in Control or (B) during the six (6) month period preceding a Change in Control;
provided
that to the extent a termination occurs pursuant to the foregoing clause (B), the Executive shall receive the benefits described in
Section 2(a)
in accordance with the terms thereof and any additional benefits provided in this
Section 2(d)
shall be paid in accordance with the terms hereof;
provided
further
that if a Change in Control subsequently occurs, the unpaid balance of the benefits provided in
Section 2(a)
shall be provided in accordance with this
Section 2(d)
. If any termination described in this
Section 2(d)
occurs, the Executive (or the Executive's estate, if the Executive dies after such termination and execution of the release but before receiving such amount) shall receive the following:
(i)
The Company shall pay the Executive the Accrued Compensation;
(ii)
Subject to Section 2(f) and the Executive's continued compliance with the obligations in Sections 3 hereof:
(1)
A lump sum payment of an amount equal to one and one-half (1.5) times the Executive's target annual cash incentive bonus for the fiscal year in which the Termination Date occurs, payable within thirty (30) days following the Termination Date
(2)
The Company shall pay the Executive an amount equal to two (2) times the Executive's base salary in effect on the Termination Date, payable in a lump sum within thirty (30) days following the Termination Date;
provided
that to the extent a Change in Control is not a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Code Section 409A then, notwithstanding the foregoing, any amount payable under this
Section 2(d)(ii)(2)
which constitutes “nonqualified deferred compensation” for purposes of Code Section 409A shall be payable in pro-rata equal installments over the eighteen (18) month period following the Termination Date in accordance with
Section 2(e)
hereof;
(3)
Subject to the Executive's timely election of continuation coverage under COBRA, for up to eighteen (18) months following the Termination Date, the Company shall, at its expense, provide to the Executive and the Executive's beneficiaries medical and dental benefits similar in the aggregate to the those provided to the Executive immediately prior to the Termination Date;
provided
,
however
, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's
right to continue such medical and dental benefits under applicable law (such as COBRA);
provided
,
further
, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this
Section 2(d)(ii)(3)
if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable); and
(4)
Immediate accelerated vesting of all outstanding equity-based incentive awards (using, if applicable, the goal (100%) level of achievement under the respective award agreement to determine such number).
For purposes of this Agreement, “
Change in Control
” shall have the meaning ascribed thereto in the Express, Inc. 2010 Incentive Compensation Plan, as amended from time to time.
(e)
Except as otherwise expressly set forth herein, the amounts payable to the Executive pursuant to this
Section 2
will be paid to the Executive at such times as the Executive would have otherwise been entitled to receive such amounts had the Executive not been terminated (determined in accordance with the Company's payroll practices at the time of termination) and only so long as the Executive has not breached the provisions of this Agreement or any other restrictive covenant and/or non-competition agreement between the Executive and the Company or any of its affiliates.
(f)
The parties acknowledge and agree that damages that will result to the Executive for termination by the Company of the Executive's employment without Cause or by the Executive for Good Reason shall be extremely difficult or impossible to establish or prove, and agree that the amounts payable to the Executive under
Section 2(a)
or
Section 2(d)
beyond the Accrued Compensation shall constitute liquidated damages for any such termination. The Executive agrees that such liquidated damages shall be in lieu of all other claims that the Executive may make by reason of any such termination of employment. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the Accrued Compensation shall only be payable if the Executive delivers to the Company and does not revoke a general release of claims in favor of the Company in a form satisfactory to the Company. Such release must be executed and delivered (and no longer subject to revocation, if applicable) within 60 days following the Termination Date. Notwithstanding anything to the foregoing set forth herein, to the extent that the payment of any amount described in
Section 2(a)
or
Section 2(d)
constitutes “nonqualified deferred compensation” for purposes of Code Section 409A, any such payment scheduled to occur during the first 60 days following the Termination Date shall not be paid until the first regularly scheduled pay period following the 60th day following such termination and shall include payment of any amount that was otherwise scheduled to be paid prior thereto.
(g)
Executive shall not be required to mitigate the amount of any payment provided for in this
Section 2
by seeking other employment or otherwise and no such payment or benefit shall be eliminated, offset or reduced by the amount of any compensation provided to the Executive in any subsequent employment, except as provided in
Section 2(a)(ii)(3)
or
Section 2(d)(ii)(3)
.
(h)
Except as otherwise expressly provided in this
Section 2
, all of the Executive's rights to salary, bonuses, fringe benefits and other compensation hereunder (if any) which accrue or become payable after the Termination Date will cease upon the Termination Date. The Executive's termination of employment with the Company for any reason shall be deemed to automatically remove the Executive, without further action, from any and all offices held by Executive with the Company or its affiliates. The Executive shall execute such additional documents as requested by the Company from time to time to evidence the foregoing.
(i)
The parties intention under this Agreement is to provide severance benefits only under the circumstances expressly enumerated under
Section 2
hereof. Unless otherwise determined by the Company in its sole discretion, in the event of a termination of Executive's employment with the Company for any reason (or no reason)
or at any time other than as expressly contemplated by
Section 2
hereof, Executive shall not be entitled to receive any severance benefits or other further compensation from the Company hereunder whatsoever, except for the Accrued Compensation and any other rights or benefits to which Executive is otherwise entitled pursuant to the requirements of applicable law.
(j)
Notwithstanding any other payment schedule provided herein to the contrary, if the Executive is deemed on the Termination Date to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then each of the following shall apply:
(i)
With regard to any payment that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment shall be made on the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive's death (the “
Delay Period
”) to the extent required under Code Section 409A. Upon the expiration of the Delay Period, all payments delayed pursuant to this Section shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and
(ii)
To the extent that any benefits to be provided during the Delay Period is considered deferred compensation under Code Section 409A provided on account of a “separation from service,” and such benefits are not otherwise exempt from Code Section 409A, the Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse the Executive, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to the Executive, the Company's share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.
(k)
The Company may deduct or withhold from any amounts owing from the Company to Executive all federal, state and local income, employment or other taxes as may be required to be withheld by any applicable law or regulation.
3.
Employee Covenants
.
(a)
For the purposes of this
Section 3
, the term “
Company
” shall include Express, LLC and all of its subsidiaries, parent companies and affiliates thereof.
(b)
Confidentiality
. The Executive shall not, during the term of this Agreement and thereafter, make any Unauthorized Disclosure. For purposes of this Agreement, “
Unauthorized Disclosure
” shall mean use by the Executive for
the Executive's own benefit, or disclosure by the Executive to any person other than a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company or as may be legally required, of any confidential information relating to the business or prospects of the Company (including, but not limited to, any information and materials pertaining to any Intellectual Property as defined below);
provided
,
however
, that Unauthorized Disclosure shall not include the use or disclosure by the Executive of any publicly available information (other than information available as a result of disclosure by the Executive in violation of this
Section 3(b)
). This confidentiality covenant has no temporal, geographical or territorial restriction.
(c)
Non-Competition
. During the Non-Competition Period described below, the Executive shall not, directly or indirectly, without the prior written consent of the Company's Board, own, manage, operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner, or otherwise), any business, individual, partner, firm, corporation, or other entity that competes or plans to compete, directly or indirectly, with the Company or any of its products;
provided
,
however
,
that
the “beneficial ownership” by the Executive after termination of employment with the Company, either
individually or as a member of a “group,” as such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “
Exchange Ac
t”), of not more than two percent (2%) of the voting stock of any publicly held corporation shall not be a violation of
Section 3(c)
of this Agreement.
The “
Non-Competition Period
” means the period the Executive is employed by the Company plus one (1) year from the Termination Date.
(d)
Non-Solicitation
. During the No-Raid Period described below, the Executive shall not directly or indirectly solicit, induce or attempt to influence any employee to leave the employment of the Company, nor assist anyone else in doing so. Further, during the No-Raid Period, the Executive shall not, either directly or indirectly, alone or in conjunction with another party, interfere with or harm, or attempt to interfere with or harm, the relationship of the Company, with any person who at any time was an employee, customer or supplier of the Company, or otherwise had a business relationship with the Company.
The “
No-Raid Period
” means the period the Executive is employed by the Company plus one (1) year from the Termination Date.
(e)
Intellectual Property
. The Executive agrees that all inventions, designs and ideas conceived, produced, created, or reduced to practice, either solely or jointly with others, during the Executive's employment with the Company including those developed on the Executive's own time, which relate to or are useful in the Company's business (“
Intellectual Property
”) shall be owned solely by the Company. The Executive understands that whether in preliminary or final form, such Intellectual Property includes, for example, all ideas, inventions, discoveries, designs, innovations, improvements, trade secrets, and other intellectual property. All Intellectual Property is either work made for hire for the Company within the meaning of the United States Copyright Act, or, if such Intellectual Property is determined not to be work made for hire, then the Executive irrevocably assigns all rights, titles and interests in and to the Intellectual Property to the Company, including all copyrights, patents, and/or trademarks. The Executive agrees to, without any additional consideration, execute all documents and take all other actions needed to convey the Executive's complete ownership of the Intellectual Property to the Company so that the Company may own and protect such Intellectual Property and obtain patent, copyright and trademark registrations for it. The Executive also agrees that the Company may alter or modify the Intellectual Property at the Company's sole discretion, and the Executive waives all right to claim or disclaim authorship. The Executive represents and warrants that any Intellectual Property that the Executive assigns to the Company, except as otherwise disclosed in writing at the time of assignment, will be the Executive's sole exclusive original work. The Executive also represents that the Executive has not previously invented any Intellectual Property or has advised the Company in writing of any prior inventions or ideas.
(f)
Remedies
. The Executive agrees that any breach of the terms of this
Section 3
would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law; the Executive therefore also agrees that in the event of said breach or any threat of breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive, without having to prove damages. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Executive. The Executive and the Company further agree that the confidentiality provisions and the covenants not to compete and solicit contained in this
Section 3
are reasonable and that the Company would not have entered into this Agreement but for the inclusion of such covenants herein. The parties agree that the prevailing party shall be entitled to all costs and expenses, including reasonable attorneys' fees and costs, in addition to any other remedies to which either may be entitled at law or in equity. Should a court determine, however, that any provision of the covenants is unreasonable, either in period of time, geographical area, or otherwise, the parties hereto agree that the covenant should be interpreted and enforced to the maximum extent which such court deems reasonable. In the event of any violation of the provisions of this
Section 3
, the Executive acknowledges and agrees that the post-termination restrictions contained in this
Section 3
shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation. In the event of a material violation by the Executive of this
Section 3
, any severance being paid to the Executive pursuant to this Agreement or otherwise shall immediately cease, and any severance
previously paid to the Executive shall be immediately repaid to the Company.
(g)
The provisions of this
Section 3
shall survive any termination of this Agreement, and the existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this
Section 3
.
4.
Successors and Assigns
.
(a)
This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term “the Company” as used herein shall include any such successors and assigns to the Company's business and/or assets. The term “successors and assigns” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise.
(b)
Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative.
5.
Arbitration
. Except with respect to the remedies set forth in
Section 3(f)
hereof, any controversy or claim between the Company or any of its affiliates and the Executive arising out of or relating to this Agreement or its termination shall be settled and determined by a single arbitrator whose award shall be accepted as final and binding upon the parties. The American Arbitration Association, under its Employment Arbitration Rules, shall administer the binding arbitration. The arbitration shall take place in Columbus, Ohio. The Company and the Executive each waive any right to a jury trial or to a petition for stay in any action or proceeding of any kind arising out of or relating to this Agreement or its termination and agree that the arbitrator shall have the authority to award costs and attorney fees to the prevailing party.
6.
Notice
. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the notice of termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows:
To the Executive:
To Executive's last home address as listed in the books and records of the Company.
To the Company:
Express, LLC
1 Express Drive
Columbus, OH 43230
Attn: Executive Vice President - Human Resources
7.
Settlement of Claims
. The Company may offset any amounts the Executive owes it or its subsidiaries or affiliates against any amounts it owes the Executive hereunder.
8.
Miscellaneous
. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the Company. No waiver
by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
9.
Governing Law
. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Ohio without giving effect to the conflict of law principles thereof.
10.
Severability
. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
11.
Entire Agreement
. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.
12.
Section 409A Compliance
. The intent of the parties is that payments and benefits under this Agreement comply with Code Section 409A and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” For purposes of Code Section 409A, the Executive's right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.
EXPRESS, LLC
EXECUTIVE
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Michael A. Weiss, certify that:
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Express, Inc. for the quarter ended
May 4, 2013
;
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
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4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
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a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
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b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
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d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
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5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
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|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
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Date:
|
June 6, 2013
|
By:
|
/s/ Michael A. Weiss
|
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|
Michael A. Weiss
|
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|
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Chief Executive Officer
|
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, D. Paul Dascoli, certify that:
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Express, Inc. for the quarter ended
May 4, 2013
;
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
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4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
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5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
|
June 6, 2013
|
By:
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/s/ D. Paul Dascoli
|
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D. Paul Dascoli
|
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Senior Vice President, Chief Financial Officer and Treasurer
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Express, Inc. (the "Company") on Form 10-Q for the quarter ended
May 4, 2013
as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Michael A. Weiss, Chief Executive Officer of the Company, and D. Paul Dascoli, Senior Vice President, Chief Financial Officer, and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of each of our knowledge:
|
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1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
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2.
|
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries.
|
Date:
June 6, 2013
|
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|
/s/ Michael A. Weiss
|
Michael A. Weiss
|
Chief Executive Officer
|
|
/s/ D. Paul Dascoli
|
D. Paul Dascoli
|
Senior Vice President, Chief Financial Officer and Treasurer
|
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.